Introduction to Portfolio Management
Definition of Risk
Uncertainty: Risk means the uncertainty of future outcomes. For instance, the future value of an investment in Google’s stock is uncertain; so the investment is risky. On the other hand, the purchase of a six-month Certificate of Deposit has a certain future value; the investment is not risky.
Probability: Risk is measured by the probability of an adverse outcome. For instance, there is 40% chance you will receive a return less than 8%.
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Definition of Risk Uncertainty: Risk means the uncertainty of future outcomes. For instance, the future value of an investment in Google’s stock is uncertain; so the investment is risky. On the other hand, the purchase of a six-month Certificate of Deposit has a certain future value; the investment is not risky. Probability: Risk is measured […]
