Flashcards
Risk and Reward - Impact, Probability and Features of Risk
Flashcards do conjunto (16)
- 1The greater the risk......the greater the reward! :D
- 2The greater the reward......the greater the risk. :/
- 3What are the features of risk?>Physical injury or death
>Loss of or damage to possessions
>A legal liability
>A financial loss - 4With what the risk is associated?>Uncertainty - we don't know the future.
>Probability - situation can higher the risk.
>Chance - speculative risk.
>Unachieved expectations - failed plans. - 5Why a person would take a risk?It's worth it!
>A person receives their reward(assuming that probability of risk is low)
>Higher risk must give higher return
>An individual is risk tolerant/averse (depends on the probability of risk) - 6How risky is current account?Little-bit risky = as long as you are not overdrawn, you're safe(FSCS)!
- 7How risky are premium bonds?SAFE!
=100% backed by the government
*but probability of wining cash is small x) - 8How risky is saving account?Little bit :/
If you don't put money into the account for few months, the interest is lost -_-
And you lock up your money. (Too bad, you can't make rain out of it ) :c - 9How risky are unit trusts?Quite risky
=value can go up and down(stock market movements)
*however, the risk is spread over many different companies = possibility of good return - 10How risky are shares?VERY RISKY in newly quoted company.
Quite risky in an established company. - 11How the risk applies to interest rates?1. Interest rates varies.
=people who own shares hopes that the price of shares will rice at the stock market. +dividends
2. If a person wants to have greater interest rate on their investment, they will take greater risk = saving for medium term. - 12What's the trade off of risk/reward for a person, who is borrowing medium-long term?Risk = may be unable to keep up with their repayments (inflation).
Reward = will be able to buy a property or other product. - 13Are people are just risk tolerant and averse?No, they have different degrees of risk acceptance.
e.g. high risk acceptance, average risk tolerance, risk averse, highly risk averse. - 14How do you transfer the risk?INSURANCE
*some people may not take insurance for some things because they believe that they can deal with it without help. - 15IMPACT OF RISK1. The amount of money involved
2. The effect on lifestyle
3. The timing of the event
4. The frequency of the event - 16PROBABILITY OF RISKProbability x Impact = Degree of risk
It means how likely it is that it will happen.
Impacts = external and internal factors
Informações
- Descrição
- >Risk and reward trade off >Features of risk > Risk of financial products > Interest rates and risk/reward >Attitudes to risk and financial planning > Impact and probability of risk
- Criado por
- Jevgenija Zukova
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