Risk and Return of the Financial Assets-Free-Samples for Students

Question: Examine the Risk and Return Characteristic of a two asset Portfolio. Answer: Introduction: It is required for every investor to analyse the risk and return of the financial assets in which the investment is done. This report briefs the user about various levels through which a goof portfolio could be analysed. This report mainly depict about an investor uncle and their investment. Investor risk preferences: Risk preferences are mainly related to the attitude of an investor towards the risk. This is the key factor dor the investor to make a better decision about the performance of the portfolio. Through this case, it has been analysed that the investor is looking for lower risk. The max risk he could bear is 18% from the portfolio. According to the given calculations, the portfolio 3 is better in case of the risk (Deegan, 2013). Implied risk profile: Implied risk profile depict about the total risk which is occurred in order to invest the amount in some securities or portfolio. In the terms of finance, the implied risk could be seen according to the associated return. According to the case, it has been found that the Uncle doesnt want to face higher risk and that is why he is looking for the portfolio in which lesser risk is associated (Kaplan and Atkinson, 2015). Optimal portfolio of risky assets: Through the calculations, it has been analysed that the optimal portfolio of the asset is the level where the risk and return of the portfolio is in the favour of the investor. According to the given case, it has been analysed that the portfolio 7 is better if entire risk and return factor is considered as the return would be high at this point with lesser risk occurrence chances. So the Uncle is suggested to invest 40% amount in the first assets and 60% in the second assets (Du and Girma, 2009). Risk and return: Through the calculations, it has been analysed that the risk and return of each portfolio is different due to different cone efficient attached with it. Through these calculations, it has been analysed that the inventor is required to invest into the assets according to their requirement. If the return factor would be considered than the associated risk would also be higher at the same time, if the risk factor would be consider than the return would be lower (Gitman and Zutter, 2012). Through the analysis, it has been found that the risk and return must be set in a manner that the investor could get high benefits through it. Recommendation: According to the given calculation of the portfolio, it has been analysed that the expected risk of portfolio one is lower but if both the assets are taken into consideration than the risk and return of the portfolio would vary. According to the given calculations, it has been found that the portfolio 7 would be better for the investor to invest the amount and achieve the goal. Thus the investor is required to understand each concept and statistics of investment and must make a decision accordingly. References Deegan, C., 2013.Financial accounting theory. McGraw-Hill Education Australia. Du, J. and Girma, S., 2009.Source of finance, growth and firm size: evidence from China(No. 2009.03). Research paper/UNU-WIDER. Gitman, L.J. and Zutter, C.J., 2012.Principles of managerial finance. Prentice Hall. Kaplan, R.S. and Atkinson, A.A., 2015.Advanced management accounting. PHI Learning.