1
High-Risk Investments
Strayer University
FIN550 Corporate Investment Analysis
, 2
High-Risk Investments
Investments are commitments of resources whose goal is to reap future profits and
rewards for the time and money that has been committed with an expected rate of inflation, the
uncertainty of future payments, Investors usually invest for a particular time of their future
returns; which are never precisely on point. As an investor, there is always the element of risk as
being actual or a deviation from the expected return; investors usually prefer investments with
the highest expected return (Frank K. Reilly; Keith C. Brown; Sanford J. Leeds & Frank K.
Reilly; Keith C. Brown; Sanford J. Leeds, 2019)(Frank K. Reilly; Keith C. Brown; Sanford J.
Leeds & Frank K. Reilly; Keith C. Brown; Sanford J. Leeds, 2019).
Explain why investors may be attracted to high-risk investments such as exchange-traded
derivatives, global funds, and other complex investment vehicles.
There is a standard of economics that above average returns are not obtainable without
taking risks. Investors believe that if there is no risk, there is no reward; like a bodybuilder who
stresses “no pain, no gain” it is the risks that the investor is willing to take. In order to be
successful, you have to take risks; the idea that is open for discussion when it comes to investing
that will drive a financial analysis into celebrating those who take risks as the achievers in our
society today. An investor will only get excess returns when they take risks; the Capital Asset
Pricing Model (CAPM)(Sharpe, 1964), is the brainchild that is used as an economic model to
evaluate stock, securities, derivatives and assets by equating the risk with the expected return.
This model is based on the demand for additional expected returns by the investor when they
accept additional risks (Lintner, 1969).
When we look at the relationship between the risk and return, many people become
obsessed with searching for high-risk investments, anticipation the high rewards, however, the
High-Risk Investments
Strayer University
FIN550 Corporate Investment Analysis
, 2
High-Risk Investments
Investments are commitments of resources whose goal is to reap future profits and
rewards for the time and money that has been committed with an expected rate of inflation, the
uncertainty of future payments, Investors usually invest for a particular time of their future
returns; which are never precisely on point. As an investor, there is always the element of risk as
being actual or a deviation from the expected return; investors usually prefer investments with
the highest expected return (Frank K. Reilly; Keith C. Brown; Sanford J. Leeds & Frank K.
Reilly; Keith C. Brown; Sanford J. Leeds, 2019)(Frank K. Reilly; Keith C. Brown; Sanford J.
Leeds & Frank K. Reilly; Keith C. Brown; Sanford J. Leeds, 2019).
Explain why investors may be attracted to high-risk investments such as exchange-traded
derivatives, global funds, and other complex investment vehicles.
There is a standard of economics that above average returns are not obtainable without
taking risks. Investors believe that if there is no risk, there is no reward; like a bodybuilder who
stresses “no pain, no gain” it is the risks that the investor is willing to take. In order to be
successful, you have to take risks; the idea that is open for discussion when it comes to investing
that will drive a financial analysis into celebrating those who take risks as the achievers in our
society today. An investor will only get excess returns when they take risks; the Capital Asset
Pricing Model (CAPM)(Sharpe, 1964), is the brainchild that is used as an economic model to
evaluate stock, securities, derivatives and assets by equating the risk with the expected return.
This model is based on the demand for additional expected returns by the investor when they
accept additional risks (Lintner, 1969).
When we look at the relationship between the risk and return, many people become
obsessed with searching for high-risk investments, anticipation the high rewards, however, the
