Explain risk aversion, Financial Management

Assignment Help:

What is risk aversion? If common stockholders are risk averse, how do you explain the fact that they often invest in very risky companies?

Risk aversion is the trend to avoid additional risk. Risk-averse people will prevent risk if they can, if not they receive additional compensation for assuming that risk.  In finance, the added compensation is a higher expected rate of return.

People are not all are equally risk averse. For instance, some people are willing to buy risky stocks, whereas others are not.  The ones that do, though, almost all time demand an suitably high expected rate of return for taking on the additional risk.


Related Discussions:- Explain risk aversion

Evaluate alternative hedging strategies, Peak Inc. needs to order Canadian ...

Peak Inc. needs to order Canadian raw materials to use in its production process. The Canadian exporter typically invoices Peak in Canadian dollars. Assume that the current exchang

What is a fair price for a share, Sega Inc. expects earnings/dividends to g...

Sega Inc. expects earnings/dividends to grow at an annual rate of 30 percent for the next 4 years. After that they feel that the market will get saturated and the growth rate will

Inventory turnover, Inventory T ur nover In the accounting, ...

Inventory T ur nover In the accounting, a measure of the number of times that the average amount of inventory on hand is sold within a given time of period. In the o

What is post-acquisition integration, Post-acquisition integration In o...

Post-acquisition integration In order to have constructive discussions between organisations, it's strongly recommended that all participants in process adopt a set of ground r

Ledge ac count, Ask question #Minimum 100 words accepted

Ask question #Minimum 100 words accepted

Approximating the percentage price change using duration, Let us expr...

Let us express the process of calculating approximate percentage price change for a given change in yield and a given duration using the following formula:

OPERATING CYCLE, discuss the applicability of operation cycle in avegetab...

discuss the applicability of operation cycle in avegetable growing business

Assignment, Imagine you have been allocated $100,000 which is to be investe...

Imagine you have been allocated $100,000 which is to be invested in 8 companies listed on the Australian Stock Exchange (ASX). You are required to have a balanced portfolio betwee

How will you conclude the cost of capital, Q. How will you conclude the cos...

Q. How will you conclude the cost of capital from different sources? Ans. Implication of Cost of Capital: - Cost of capital of a firm is the least rate of return expected by it

Microsoft''s Partenership Strategies, I have a presentation to give on ''Ne...

I have a presentation to give on ''New ways'' Microsoft can improve its ''Partnership Strategies''. Can some one please give some good links or insights into the same.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd