Quiz Two | Why It Is RISK ?

Please find the following questions to prepare for your Quiz Two next week. The quiz will be conducted in only Chapter 2 : Understanding Risk Management :

(Khmer Questions Available Below)

This video provides some tips to get good score during exam.

1. What is Risk ?
2. How many types of Risk ? Please count them and brief each type ?
3. What is systematic risk ?
4. What is non-systematic risk ?
5. What is country risk ?
6. Please count 5 risk that you didn't study from the book ? Explain them ?
7. How do you manage risk ? Please explain them in detail with examples ?
8. How do you manage risk by using technique "Risk Avoidance"?
9. What can you explain why Investor Averse Risk ? How to deal with it ?
10. If you want to invest in one country, which type of risk will you prioritize the most ?
11. How many ways to measure risk ? Please explain each way briefly ?
12. How do you measure risk by volatility ?
13. What are the three normal distribution of Standard Deviation ?
14. If we use Beta to measure Risk, what are components they should consider ?

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Expected Value and Probability Distribution | EV, PD | Sample Exercises

Probability Distribution indicating the sum of possible events in one specific case which affecting the mean of returns. Possible event may occur at least from 2 up and the total always equal 100% or 1. 1 is each case of complete events. Each percentage of possible event (P) will help to define the together possible value from each event (return - R) to calculate Expected Value (or sometimes they call expected returns).

The formula or Probability distribution is: PD = P(1) + P(2) + ... + P(n)

• Where P is percentages (%) each possible event may occur
• And n is number of event may occur
• P(1) + P(2) + .... + P(n) = PD =100% = 1

The formula or Expected Value is : EV =  R(1).P(1)  + R(2).P(2)  + .... + R(n).P(n)

• Where R is return from each possible event, i.e. R(1) is return from event (1) or P(1)
• Ev is currency, R is currency, while P is percentage.

Please try the following sample exercises ! The answer is attached in the videos . 

1. In case of you will receive approximate revenue from your invested with Company A $130,800, with Company B $22,600, with Company C $140,600, and with the Company D $80,000. By assuming that, the probability distribution is 25%, 30%, 30% and 15% respectively. Please calculate Expected Value (Return)?
2. Mr. Bona is earning from Instance payment online system, called “JustBeenPaid.com”. He owns 10 shares on this website. To get paid 100%, he has to click on 10 advertisements (Advs) per day.  If he clicks 6 Advs, he will get paid $ 60.00 per day. If he is so busy, he clicks only 3 Advs, so he will get paid $ 30.00. Otherwise, he is so tired and sleepy, he clicks only 1 Advs, he will get only $ 10.00. 
        a) Please find percentage of clicking 6 Advs-P1, click 3 Advs-P2, and click 1 Advs-P3 ?
        b) Please find Expected value from each share ?
        c) Please find Total Expected value from all his shares ?
3. Somaly is known as top selling Dell Laptop during exhibition 2012 at Sorya super market. Today, she joins the DELL generation at RUPP. She is asked to sell new arrival products. The possible hot sale product is DELL Vostro and Inspiron. We consider if she could sell up to %65, it means she can earn about $4500.00. If she can only achieve medium sale is 22%, she might earn only $2800.00. However, the lowest sale might be at $ 1150.00.
         a) Please find percentage of return from lowest sale (P3) ?
         b)  Please define the expected value (EV) of DELL selling by Somaly ?

The answer is attached in the videos .   

 

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Investing RISK

There are many ways to handle Risk in Investing. The standard risk management are: avoidance, acceptance, transferring, and reducing. Risk is always stick with returns where investors know that "the more return they receive, the higher risk they will face." From the concept of facing with Risk, investors should consider on their investment by:

• Setting up clear goal
• Setting up possible returns
• Understanding Risk in Investment
• Setting up Financial Planning and Reviewing periodically
• Setting up Retirement Plan
• And Risk Policies (team and management).

How much you understanding about Investing Risk ? 
The following video will let you know and capture some knowledge about investing risks with example of International Stocks and graph of Return defining level and possibility of Risk you might face (Risk and Returns):

1. Stock : Large Stock, small stock, preferred stock, common stocks
2. Bond : Government bond, long term, short term, company bond, ... etc.
3. Bills : Treasury bill, commercial papers, ...etc.

How to Handle Risk : Free ways 
The four step of handle risk is easy to understand as the following. We using standard management in avoiding, accepting, transferring, and reducing:

1. Risk Avoidance: avoiding any activities concerning to risk or willing to happen. For example, drunk drive causes traffic accident, then should not drive when drunk.
2. Risk Acceptance: accepting any risk that willing to happen and categorize them into group, types, small plot, and decide how to deal with it.
3. Risk Transferring: investors sometimes can transfer some risks to other agency to handle it (i.e. buying insurance, external auditors, outsourcing teams, ...) or might make the risk to other opportunities. 
4. Risk Reducing: Some risks are bigger and larger affecting investing, so they reduce them into small cap and decide how to fight it with it from a way of accepting, then transferring, avoiding, or dealing by themselves.

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