write an application report in chapter 9 on \" application of risk and return\"
ID: 2616917 • Letter: W
Question
write an application report in chapter 9 on " application of risk and return" In the paper, describe a few examples of your learning, discuss how you are helped by this learning and consider the future implications of what you have learned for your effectiveness at work, school, personal life or in your community. Be specific and use examples. This is also an opportunity to synthesize elements of the class (e.g., when you look at a particular investment, savings vehicle, mortgage, or car loan, can you identify the risk or opportunity in the product?). To the extent possible, please utilize the following model: 1.) What’s the experience; 2.) What did you learn, and 3) What’s the applicable and generalizable lesson.
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Explanation / Answer
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A general view on "application of risk and return" is discussed below:
Risk and return are 2 implications that run simultaneoulsy to each other ie they move in same direction. Return is a function driven from the amount of risk the inderlying asset has. To better explain:
More Risk...........> More Return
Less Risk............> Less Return
This happens because volatility of riskier investment is most of the time higher than the less risky one.
Example: A stock price is more likely to change than interest rate on Fixed deposit, this is why investments in stocks earn more than fixed interest income in case of Fixed deposit. At the same time, Returns on Fixed deposits are certain in comparison to returns on stocks because market can turn up or down anytime but interest rates will not change.
This is why investment type is decided by risk tolerance of the investor and not completely based on the historical returns of the underlying.
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