Explain Why Analysts and Investors Use Risk-Adjusted Expected Rates of Return

question 8

Essay

Explain why analysts and investors use risk-adjusted expected rates of return as discount rates in valuation.Why do risk-adjusted expected rates of return increase with risk?

---

Definitions:

Personal Finance MAGAZINES

Publications that provide information and advice on managing personal finances, including investing, saving, and budgeting.

Stocks

Shares representing ownership in a corporation, giving holders a claim on part of the company's assets and earnings.

Advice

Guidance or recommendations offered regarding prudent future actions, often based on knowledge and expertise.

Indexed Equity

An investment strategy that attempts to replicate the performance of a specified stock market index.