Explain the return and risk relationship concept in finance. Describe a situation whereby a departmentâ€™s attitude...

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Finance

Explain the return and risk relationship concept in finance.
Describe a situation whereby a departmentâ€™s attitude is: Riskneutral, risk-averse or risk-seeking.
Explain and critically analyse the distinction between decisiontree, expected value and maximax, maximin and regret criterion canbe used for decision-making under conditions of risk anduncertainty. The managing director of Bounce Ltd has asked you toexplain how each method of the above can be applied indecision-making and comment on the strengths and limitations ofeach method.

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The risk and return relationship in finance states that an investor expects higher return for an investment which has greater amount of risk These risks could be political risk interest rate risks liquidity risks or default risks So typically an instrument having higher risks should provide an investor with a higher return to compensate the investor for taking on such a higher amount of risk A department is risk neutral wherein it only seeks to maximize the expected value of an investment For example an investor having risk neutral outlook would be indifferent between an See Answer

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