1. The average squared difference between the actual return and the average return is called variance
2. The average compound return earned per year over a multi-year period is called the _ average geometric
3. The capital gains yield plus the dividend yield on a security is called the total return
4. Which one of the following is a correct statement concerning risk premium? a. The greater the volatility of returns, the greater the risk premium
the principle of diversification tells us that spreading an investment across many diverse assets will eliminate come of the risk
the linear relation between an assets expected report and its beta coeffiect is the SML
you are considering purchasing stock S. this stock has an expected return of 8% if the economy booms and 3% if recession. the overall expected ROR on this stock will increase as the probability of the boom increases
the expected return on a stock that is computed using economic probabilties is a mathmateical expectation based on a weighted average and not an actual anticipated outcome
the characteristic line is graphically depicted as the plot of the security returns vs the market index returns
the zoo co just declared that it is increasing its annual dividend from 1 to 1.25 per share. if the stock price remains constant then the dividend yield will increase
a cap gain occurs when the purchase price is less than the selling price
the risk premium for a security is computed by multiplying the beta by market risk premium
the dominant portfolio with the lowest possible risk is the MVP
if the covariance of stock 1 and stock 2 is -.0065 then that is the covariance of stock 2 w stock 1 -.0065
calculate correctly priced stock of the risk free ROR is 3.6 and the market rate return is 10.5
net working capital current assets – current liabilities
cash flow from operating activities the cash flow that results from the firms ongoing normal business activities
the liquidity effect of a decrease in the money supply deals with the impacts on portfolio, bond prices, and IR of a decrease in liquidity
financial framework for cash flows if a firms has a large negative figure for free cash flows, then it will have the same large negative value as the sum for cash flows to creditors and stockholders
primary market where the company receives proceeds from the sale, not for regular people
secondary markey gain or loss on equity is absorbed by investors
dealer one that buys and sells form own inventory
broker doesn’t maintain inventory, goes to market to get it
organized exchange physical place (NYSE)
OTC not physical (NASDAQ)

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