Fill in the blank using a number of terms listed below (@1 point per question).
Beta coefficient, Bonds, CAPM, Cash flows, Change, CV, Convertible bonds, Correlation, Correlation coefficient, Debenture, Discount, Diversifiable risk, Expected return, Interest rate risk, Inverted, Junk Bonds, Market risk, More, Normal, Opposite, Probability distribution, Ratings, Reinvestment rate risk, Risk, Risk averse investor, Risk premium, Standard deviation
______________is the chance that some unfavorable event will occur. For instance, the risk of an asset is essentially the chance that the asset’s cash flows will be unfavorable or less than expected.
A __________________ is a listing, chart or graph of all possible outcomes, such as expected rates of return, with a probability assigned to each outcome.
The ______________________is a statistical measure of the variability of a set of observations. The variance of the probability distribution is the sum of the squared deviations about the expected value adjusted for deviation.
The _______________________ is equal to the standard deviation divided by the expected return; it is a standardized risk measure which allows comparisons between investments having different expected returns and standard deviations.
A _______________________ dislikes risk and requires a higher rate of return as an inducement to buy riskier securities. A realized return is the actual return an investor receives on their investment. It can be quite different than their _______________________.
A ________________ is the difference between the rate of return on a risk-free asset and the expected return on Stock i which has higher risk.
_________________ is a model based upon the proposition that any stock’s required rate ofreturn is equal to the risk free rate of return plus a risk premium reflecting onl y the risk remaining after diversification.
_________________ is the tendency of two variables to move together. A _________________ of +1.0 means that the two variables move up and down in perfect synchronization, while a coefficient of -1.0 means the variables always move in opposite directions.
_________________ is that part of a security’s total risk that cannot be eliminated by diversification. It is measured by the beta coefficient. _________________ is also known as company specific risk. This risk can be eliminated by proper diversification.
The _________________ is a measure of a stock’s market risk, or the extent to which the returns on a given stock move with the stock market.
