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?

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Definitions:

Analytical Reports

Documents that provide a detailed examination and interpretation of data or findings, often used to support decision-making processes.

Structuring

The process of organizing or arranging components in a systematic, coherent manner.

Solicited Proposals

Proposals that are requested by an organization or individual, often through a formal process, to address specific needs or projects.

External Party

An individual or group outside of an organization that has a stake or interest in the business, such as suppliers, customers, or regulatory bodies.