EXAM PAPER

Exam Paper

Exam Paper

Question 1

Risk Aversion Model

The risk aversion is an economic behavior. Investors usually have some aversion to risk. They prefer to remain relatively safe to gain a much larger but uncertain gain. It led to the economic concept of value and the concept of risk premium, which allowed a better understanding of the balance of price and performance. However, there is a saying that if nothing ventured, nothing gained. Without taking the risk there would be no possible gain for a business and it will sink into apathy. It has been shown by research in behavioral finance that risk should be taken with some caution, the behavior of economic agents in relation to the risk and the expected gain is actually very complex and changing.

Clarke (2012) puts forward that risk is contextual and that a risky versus less-risky position is completely reliant on the conditions at that juncture. Clarke (2012) proposes that buying risk (even unknowingly) is sometimes essential. There has been a dramatic growth of market over the time; and if a business shows reluctance towards taking risk then it is quite possible that once far-and-away the market leader, their product now explicates a marginal of market sales on the whole. The inaction's opportunity cost of an organization can cost hundreds of millions of dollars in annual revenue foregone.

That opportunity cost, certainly, turns pale in relation to the leads consumed, and billions in revenue forgone, over the last five years, by Microsoft, Palm, and RIM in the markets of mobile handset because of doing not much of anything effectively whereas Google and Apple have swept up and grabbed the market. More revenue is now made by Apple from its mobile products only — a product category that did not even present a few years ago at Apple— than is yielded by the whole Microsoft Corporation.

Risk Averse: iOS on a Way to Windows XP?

Apple has been on an unbeatable roll, until recently. The iPhones and iPads of Apple have been flying off the shelf. However, when latest quarterly results of Apple got thumbs down from the market, from Wall Street, the question arose in minds of lots of people if Apple had fell behind its magic. The question arises that where the iOS stand today? It is argued by Erica Ogg at Gigacom that there has been little change, in spite of the fact that there have a number of iOS releases. However, it is argued by Sobotta (2013) that it will be hard for Apple to implement the change. If no longer, the iPhone and the iPad are the clear leaders of technology, then big change appears sequentially. Ironically, loyal customers of Apple who still have an intention to buy a new iPhone might be an obstacle. Without dropping off the customers' loyalty, it will not be an easier task for Apple to change iOS.

Sobotta (2013) proposes that it is not a novel situation for Apple and it has been in this position ...