Chapter 8 Assignment Descriptions Terms 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. Beta coefficient The rate of return expected to be realized from an investment, calculated as the mean of the probability distribution of its possible returns. Capital Asset Pricing Model Coefficient of variation 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. Diversification Equilibrium A model that calculates the required return on an asset as the sum of the market's risk-free rate and the asset's nondiversifiable risk. Expected rate of return Market risk The condition of price stability that results from the equality of a security's expected and required returns Risk Risk premium This statistical measure, which is calculated by dividing the standard deviation of an investment's Stand-alone risk returns by its mean, or expected return, represents a security's risk per unit of return. A measure of the extent to which the returns on a given investment are correlated with the returns of a market portfolio