Flashcards
Chapter 11 Cue Cards
Cards in this deck (13)
- 1Measuring % Rate of ReturnCapital Gain + Dividend / Initial Share Price
- 2Formula for Capital Gain YieldCapital Gain/Initial Share Price
- 3Formula for Dividend YieldDividend / Initial Share Price
- 4What is a Market IndexMeasure of the investment performance of the overall market
- 5Rate of return on a security calculationRate of Return on T-Bill + Market Risk Premium
- 6Volatility of returns is what is considered as safety T/FFalse
Considered as RISK - 7Stocks have highest average rate of return and highest level of volatility T/FTrue
- 8What is Unique Risk?Risk factors affecting only that firm
(Also called Diversifiable or non systematic) - 9Define Market RiskEconomy-Wide sources of risk that affect the overall stock market.
- 10How does Diversification reduce risk?Assets in the portfolio do not move in exact harmony with each other so if one does bad, another probably does well.
- 11What does reduction in risk of portfolio depend on?Correlation Coefficient between assets
(Value is between +1 and -1) - 12Define CovarianceDegree to which the returns on two stocks are related
- 13What is portfolio riskRisk of a portfolio depends on the weights assigned to the assets, individual risks and the correlation coefficients between them