Q1

Match the terms relating to the basic terminology and concepts of risk and rates of return on the left with the descriptions of the terms on the right. Read each description carefully and type the letter of the description in the Answer column next to the correct term. These are not necessarily complete definitions, but there is only one possible answer for each term. A. The condition in which the expected return on a security equals its required return, and there is no pressure on its price to change. B. The general term that describes the portion of an asset's total expected return that is greater than the return earned on the market's risk-free rate. C. The mean of the probability distribution of an investment's possible returns, and the return expected to be realized from owning it. D. This statistical value provides a standardized measure of a security's risk per unit of return, and is useful in comparing the expected returns of different investments. E. The possibility that an actual outcome will be better or worse than its expected outcome. F. That portion of an investment's risk calculated as the difference between its total risk and its firm-specific risk. G. The term applied to the risk of an asset that is measured by the standard deviation of the asset's expected returns. H. The result of adding additional assets to a portfolio, when the returns of the individual assets are non-correlated. I. A measure of the extent to which the returns on a given investment are correlated with the returns of a market portfolio. J. A model that calculates the required return on an asset as the sum of the market's risk-free rate and the asset's non diversifiable risk