Chapter 3  

Risk and Return


Review Questions...

A. Objective Type and Multiple Choice Question (1 Mark Questions 

1. Select the most appropriate answer:

(i) Risk and return have a:

(a) Positive relationship;

(b) No relationship;

(c) Negative relationship;

(ii) Risk and uncertainty are:

(a) synonymous terms;

(b) different in perception;

(c) same terms.

(iii) Financial risk is associated with 

(a) Risk due to inflation 

(b) capital structure of a company;

(c) market risk 

[Ans. (i) (a) (ii) (b) (iii) (b)]


2. Fill in the Blanks with one word each:

(i) There is a _____________ relationship between the amount of risk assumed and the amount of expected return. 

(ii) Financial risk is associated with the __________ structure of the company.

(iii) If the returns of an asset have no variability, it has _________ risk.

(iv) A Risk refers to a situation where there is possibility of _________.

(v) Risk is classified into two types (i) systematic risk; and (ii) __________ risk.

[Ans. (i) positive;    (ii) capital;    (iii) no;    (iv) loss;    (v) unsysematic.]

3. Capital Asset Pricing Model was developed by:

(a) Modigliani and Miler 

(b) William F. Sharpe;

(c) Prof. Walter;

(d) Myron Gordon.

[Ans. (b)] 


(B) SHORT ANSWER TYPE QUESTIONS 

1. What do you mean by risk?

2. Write any two techniques for measurement of risk.

3. Define risk.

4. What is systematic risk?

5. What are the two types of risk?

6. Distinguish between systematic and unsystematic risk.

7. What is risk? What are the types of risk involved in an investment? Analyse the risk and return relationship in taking investment decisions.

8. Why is standard deviation employed commonly as a measure of risk? Discuss.

9. "Higher the return, higher will be the risk". In this context, discuss the various risk associated with an asset.

10. What is CAPM?

11. What are the limitations of capital asset pricing model?


(C) LONG ANSWER TYPE QUESTIONS 

1. What is risk ? How can risk of an asset be calculated? Explain. 

2. Distinguish between systematic and unsystematic risk. 

3. What is risk? What are the types of risks involved in an investment? Analyse the risk and return relationship in taking investment decisions. 

4. " Higher the return , higher will be the risk". In this context, discuss the various risks associated with an asset. 

5. Why is standard deviation employed commonly as a measure of risk? Discuss. 

6. What is the relationship between risk and return as per the Capital Asset Pricing Model? Discuss.


Type: Nayan Moni Deka 






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