from The Open University
Alternatively you can skip the navigation by pressing 'Enter'.
BBC Inside Science: Coral, LIGO and physicsThursday, 8th October 2015 23:00 - BBC Radio 4This week on BBC Inside Science: coral resilience, gravitational waves and Seven Brief Lessons on Physics Read more: BBC Inside Science: Coral, LIGO and physics
The Bottom Line: Autumn 2015: Crisis at VW: A Bottom Line SpecialSaturday, 10th October 2015 17:30 - BBC Radio 4
The Great British Year: SpringMonday, 12th October 2015 21:00 - BBC Four
The Secret Life of Books: Series Two: The Faerie QueeneTuesday, 13th October 2015 20:30 - BBC Four
The Great British Year: WinterAvailable until Friday, 6th November 2015 22:00A frozen nation, but not a wasteland... Read more: The Great British Year: Winter
The Bottom Line: Autumn 2015: Crisis at VW: A Bottom Line SpecialAvailable until Friday, 7th October 2016 20:00
The ascent of woman: RevolutionAvailable until Friday, 6th November 2015 02:15
The world’s busiest railway 2015 – Mumbai Railway: Episode 4Available until Friday, 6th November 2015 01:15
Should the Tories be worried about their low membership numbers?The Conservative Party are enjoying a moment of victory - but although their future should be... Read more: Should the Tories be worried about their low membership numbers?
OpenLearn Live: 8th October 2015Poetry day - and two villages that aren't there. Then more free learning across the day. Read more: OpenLearn Live: 8th October 2015
Start writing fiction: characters and storiesThis free course helps you to get started with your own fiction writing, focusing on the central... Try: Start writing fiction: characters and stories now
Succeed with maths – Part 1If you feel that maths is a mystery that you want to unravel then this short 8-week course is for... Try: Succeed with maths – Part 1 now
Risk, in a financial context, is a synonym for uncertainty. This unit will allow those...
Risk, in a financial context, is a synonym for uncertainty. This unit will allow those with some background knowledge of the area to explore investment risk. You will examine how and why investors are risk-averse and look at the risk factors involved in making a decision to invest.
After studying this unit you should be able to:
- explain the concept of risk in an investment context;
- comment critically on the impact of the principal risk factors in a given investment context.
- Current section: Introduction
- Learning outcomes
- 1 Risk aversion
- 2 Quantifying risk
- 3 Risk factors
- 4 Discounted cash flow and the net present value rule
- 5 Conclusion
Study this free course
Enrol to access the full course, get recognition for the skills you learn and track your progress. Make your learning visible!
A fair return on investment is defined as one that compensates the investor for the risk incurred in making the investment – neither more nor less. Conversely, an excess return is one that over-compensates the investor for the risk incurred. Investors want to avoid investments that pay less than a fair return, while borrowers want to avoid paying an excess return. In this unit we shall:
define more precisely what we mean by ‘risk’ in a financial context;
consider how investors react to the presence or threat of risk;
develop a method of quantifying risk mathematically; and
look at the main factors contributing to investment risk in the real world.
Finally, we shall see how the use of the net present value rule enables investors to calculate whether the risks they incur are adequately rewarded.
This material is from our archive and is an adapted extract from Financial strategy (B821) which is no longer taught by The Open University. If you want to study formally with us, you may wish to explore other courses we offer in this.
This is an extract from an Open University course which is no longer available to new students. If you found this interesting you could explore more free Business Studies courses or view the range of currently available OU Business Studies courses.
Copyright & revisions
Originally published: Thursday, 19th July 2012
- Creative-Commons: The Open University is proud to release this free course under a Creative Commons licence. However, any third-party materials featured within it are used with permission and are not ours to give away. These materials are not subject to the Creative Commons licence. See terms and conditions. Full details can be found in the Acknowledgements section.
- This site has Copy Reuse Tracking enabled - see our FAQs for more information.
If you enjoyed this, why not follow a feed to find out when we have new things like it? Choose an RSS feed from the list below. (Don't know what to do with RSS feeds?)
Remember, you can also make your own, personal feed by combining tags from around OpenLearn.