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WCOB2043 Exam #3
Terms in this set (27)
A cost that has already been incurred, cannot be recovered, and thus is irrevelant for present and future economic decisions.
Cost of the next best alternative use of money, time, or resources when one choice is made rather than another
What two risks make up total risk?
What portion of total risk cannot be eliminated through diversification?
What portion of total risk can be eliminated through diversification?
Improve risk/reward tradeoff
What does diversification do to a portfolio?
What's the most logical quantitative measure of risk?
The lower the correlation coefficient, the _______ the risk/reward tradeoff.
A higher correlation coefficient leads to a ______ risk/reward tradeoff.
correlation coefficient, +1
Risk/Reward tradeoff of a portfolio is always better than those of the individual investments as long as the ________ _________ is less than ____.
The correlation coefficient range from ____ to ____.
What is the measure of market risk?
The future return you should earn given the level of risk and other conditions in the markets.
If Expected return > Required return, the asset is ___________.
If Expected return < Required return, the asset is ___________.
Face value, Coupon Rate, Maturity Date, Yield to Maturity
What are the four components of a bond?
Yield to maturity
Which bond component is not fixed?
Measure of the price sensitivity of a bond.
The longer a bond's duration, the ______ price sensitive the bond to a given change in market interest rates.
The longer the maturity of a bond, the ________ the duration.
The higher the coupon rate, the ________ the duration.
How can credit risk be assessed by investors?
Value of an asset
Present value of expected future cash flows discounted at an appropriate rate
Both preferred and common stock are __________, meaning they last indefinitely.
A bond with a low coupon is _______ price sensitive.
A bond with a high coupon is _______ price sensitive.
Which have more interest rate risk? A bond with longer maturity, or a bond with a shorter maturity?
THIS SET IS OFTEN IN FOLDERS WITH...
WCOB2043 Exam #1
WCOB2043 Exam #2
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