Home
Browse
Create
Search
Log in
Sign up
Upgrade to remove ads
Only $2.99/month
FIN 330 Ch 8
STUDY
Flashcards
Learn
Write
Spell
Test
PLAY
Match
Gravity
Chapter 8
Terms in this set (19)
Risk
The chance that an outcome other than the expected one will occur.
Probability Distribution
A listing of all possible outcomes or events, with a probability assigned to each outcome.
Expected Rate of Return
The rate of return expected to be realized from an investment, which is the mean value of the probability distribution of possible results.
Standard Deviation
A measure of the tightness, or variability, of a set of outcomes.
Coefficient of Variation
A standardized measure of the risk per unit of return, it is calculated by dividing the standard deviation by the expected return.
Risk Aversion
Risk-averse investors require higher rates of return to invest in higher-risk securities.
Risk Premium
The portion of the expected return that can be attributed to the additional risk of an investment. It is the difference between the expected rate of return on a given risky asset and the expected rate of return on a less risky asset.
Expected Return on a Portfolio
The weighted average of the expected returns on stocks held in a portfolio.
Realized Rate of Return
The return that is actually earned. The actual return usually differs from the expected return.
Diversification
Reduction of stand-alone risk of an individual investment by combining it with other investments in a portfolio.
Correlation Coefficient
A measure of the degree of relationship between two variables.
Firm-Specific Risk
That part of a security's risk associated with random outcomes generated by events or behaviors, specific to the firm. It can be eliminated by proper diversification.
Market Risk
The part of a security's risk associated with economic, or market, factors that systematically affect all firms to some extent. It can't be eliminated by diversification.
Relevant Risk
The portion of a security's risk that can't be diversified away; the security's market risk. It reflects the security's contribution to the risk of a portfolio.
Beta Coefficient
A measure of the extent to which the returns on a given stock move with the stock market.
Capital Asset Pricing Model
A model used to determine the required return on an asset, which is based on the proposition that an asset's return should be equal to the risk-free return plus a risk premium that reflects the asset's nondiversifiable risk.
Security Market Line
The line that shows the relationship between risk as measured by beta and the required rate of return for individual securities.
Market Risk Premium
The additional return over the risk-free rate needed to compensate investors for assuming an average amount of risk.
Equilibrium
The condition under which the expected return on a security is just equal to its required return, and the price is stable.
THIS SET IS OFTEN IN FOLDERS WITH...
Principals of Finance Ch 5,7
41 terms
Finance 3210 Exam 3 Dr. Cole
28 terms
Test 2
40 terms
Principles of Finance 3210 Exam 3 Dr. Cole
23 terms
YOU MIGHT ALSO LIKE...
Chapter 8 risk and rates of return
22 terms
Chapter 8 Risk and Return
33 terms
FIN 331 Chapter 8: Risk and Rates of Return
68 terms
Chapter 8: Risk and Rates of Return
24 terms
OTHER SETS BY THIS CREATOR
Media Law Test 3
27 terms
MGT 443 Ex 3
35 terms
Media Law Exam 2
52 terms
Ethics Exam 2
29 terms
OTHER QUIZLET SETS
micro questions exam 3
68 terms
econ final concepts
58 terms
Honors Civics Final Guide
40 terms
Social Exchange II
20 terms