Ch $02$: Assignment $-$ Risk and Return: Part I $-$ Pre class

Description

Term

The rate of return expected to be realized from an investment, calculated as the mean of the probability distribution of its possible returns.

A measurement of the tendency of two variables to move together.

$-$The name given to the risk that cannot be diversified away by adding additional assets to an investment portfolio since it results from the systematic events and factors that affect all investments.

A measure of the sensitivity of a security$\text{'}$s returns to fluctuations in the return earned by the market portfolio.

This model determines the appropriate required return on a security as the sum of the market's risk$-$free rate and a risk premium based on the market's risk premium and the security$\text{'}$s beta coefficient.

The condition in which the expected return on a security equals its required return, and there is no pressure on its price to change.

The potential for variability in the possible outcomes associated with an investment.

The term applied to the risk of an asset that is measured by the standard deviation of the asset's expected returns.

The practice of creating a portfolio of assets for the purpose of reducing the stand$-$alone risk of the individual assets in the portfolio.

The portion of an asset's total expected return required by investors as compensation for assuming the additional risks associated with the security, the issuer, and the marketplace.