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I would then like to thank our HOD Dr. RUCHI SINGH for addressing
to our problems and scheduling our tests in such a way that it doesn’t
hinder our progress with the assignments.
I would next like to thank my parents for their constant support to me.
Thank You
Harshita Shukla
BBA-V Sem
Roll No.:18
TYPES OF RISK:
Pure Risk: The situation in which a gain will not occur. The
best possible outcome is that of no loss occurring.
Qualitative Risk Analysis is the process for prioritizing risks for further
analysis or action by assessing and combining their probability of
occurrence and impact.
1.Realized return: The return that is ex-post in nature i.e. the investor
wishes to receive a certain return and does receive it too.
RETURN ANALYSIS:
An investment is the current commitment of funds done in the
expectation of earning greater amount in future. Returns are subject to
uncertainty or variance Longer the period of investment, greater will be
the returns sought. An investor will also like to ensure that the returns
are greater than the rate of inflation.
• Risk involved
• Duration of investment [Time value of money]
• Expected price levels [Inflation]
The basic rate or time value of money is the real risk free rate [RRFR]
which is free of any risk premium and inflation. This rate generally
remains stable; but in the long run there could be gradual changes in the
RRFR depending upon factors such as consumption trends, economic
growth and openness of the economy.
If we include the component of inflation into the RRFR without the risk
premium, such a return will be known as nominal risk free rate [NRFR]
An investor could also approach the problem from the other direction,
choosing among assets with the same risk and then choose the asset with
the highest expected return.
Analyzing both of these to maximize the value of the latter is the prime
objective of risk and return analysis.