ACTSC371 Chapter Notes - Chapter 4: Risk Premium, Demand Curve, Standard Deviation

• School: University of Waterloo
• Department: Actuarial Science
• Course: ACTSC371
• Professor: Peter B

Document Summary

Different investments carry different _______________ and different __________________. 30 day treasury bill issued by the government of canada is not as risky as a ten year bond issued by canadian tire say. If the two investments paid the ______________ to investors, We saw from the historical survey on investment returns, that generally, investors are compensated for risk. Equity investors have earned higher rates of return over the long term than debt investors have, etc. Business risk the risk inherent in operating the business in the particular industry. Financial risk the risk created by using debt as a source of financing. Purchasing power risk the risk of losing purchasing power over the term of the investment (fixed return not linked to inflation) Interest rate risk risk that change in interest rates will impact investment return. Liquidity risk risk of not being able to sell an investment as quickly as one would like.