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c %
  

      




   



  
  

 
  

 


 


 
  
  

  


‘
c The chance that the actual outcome form an investment
will differ from the expected outcome
‘ 

c Mncome received on an investment plus any change in
market price, usually expressed as a percent of the
beginning market price of the investment.



‘
c dusiness Risk
c Financial Risk
c Mnterest Rate Risk
c Liquidity Risk
c Market Risk
c Event Risk
c Exchange Rate Risk
c Purchasing Power Risk
c Tax Risk
d 
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c The chance that the firm will be unable to cover its
operating cost. dusiness risk affects holders of stocks and
bonds, since a firm may be unable to pay dividends and
interest.
{


‘
c The risk that the company will not have sufficient funds to
meet its financial needs is termed as financial risk. The risk
arises when companies use debt securities for raising
finance. The companies, which issue more debt securities,
will have higher financial risk.
M 

‘

‘
c The risk that arises due to changes in the interest rate and
these changes have an impact on the prices of the
investments that is, investment value will change due to
changes in interest rates. Other things being equal, security
prices move inversely to interest rates.
’ 
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c The risk that arises from the difficulty of selling an asset in
a timely manner. Mt can be thought of as the difference
between the "true value" of the asset and the likely price
less commissions.
À

 
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c The risk that the investment value of the security will get
reduced to change in the market conditions is market risk .
The market risk affects almost all the industries and one
such factor from which market risk arises is war between
two countries
× 
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c The risk that the ability of an issuer to make interest and
principal payments will change because of rare,
discontinuous, and very large, unanticipated changes in the
market environment
×


‘

‘
c The risk that an investment's value will change because of
currency exchange rates.
c Also called currency risk
w

 
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‘
c The risk that the rate of inflation will exceeds the rate of
return on an investment.
c Also called Mnflation Risk



‘
c The chance of unfavorable changes in tax laws will occur.
‘
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c Risk Mndifferent
c Risk Averse
c Risk Seeking
‘
M 

c The attitude toward risk in which no change in return
would be required for an increase in risk
‘


c The attitude toward risk in which an increased return
would be required for an increase in risk
‘
  
c The attitude toward risk in which a decreased return would
be accepted for an increase in risk.




 

c The most common Statistical indicator of an assetǯs risk; it
measure the dispersion around the expected value.
3  





c A measure of relative dispersion that is useful in comparing
the risks of assets with differing expected returns.