A typical stock will have an expected return of ______ and a stand-alone risk of _____
Give this one a try later!
E(r); Standard Deviation
That's why we combine assets to reduce average risk
IRR Decision Rule
Give this one a try later!
If the IRR > Cost of Capital, we accept
,Profitability Index
Give this one a try later!
Ranks projects by efficiency: Payoff (Returned) /Resources Used
Budget: NPV + |initial cost|/ |initial cost|
Resource: NPV/# Resources Used
Increase in PI, Increase in efficiency
What does B measure?
Give this one a try later!
Regression Coefficient
How does the market portfolio return influence stock "i"'s returns
What are the limits of diversification?
Give this one a try later!
After 20-30 assets, we are fully diversified and we can't get rid of anymore
diversifiable risk.
Benchmark level of risk (diversified portfolio risk)
,What does Historical Risk and Return mean?
Give this one a try later!
That we are using ACTUAL data for our calculations
Increase in Net Income for the Firm
Give this one a try later!
Increase in Net Income, Increase in Dividends, Increase in Present Value,
and Increase in Stock Price
What is a return?
Give this one a try later!
The interest of % that we earn over a time period (typically a year or month)
Primary Market
Give this one a try later!
When an existing public company issues new shares of stock to raise
capital
, Finite Holding Periods
Give this one a try later!
In a multiple period setting, investors will seek to estimate all the cash flows
that the stock will generate.
Once an investor has estimated all the cash flows, they can then discount of
"capitalize" all the flows to arrive at their personal estimation of the present
value of the stock OR their Intrinsic value for the stock.
Fundamental Analysis
Give this one a try later!
One has to examine fundamental information on the firm's operations and
management to make an accurate estimation of the firm's earnings and
ultimately its dividends, future price, and return.
Internal Rate of Return (IRR)
Give this one a try later!
The internal rate of return sets the NPV of a project equal to zero. This gives
us a percentage return.
- Units are percents, so it's an interest rate
- Rate of return on every dollar invested
- Rate that sets NPV = 0
Give this one a try later!
E(r); Standard Deviation
That's why we combine assets to reduce average risk
IRR Decision Rule
Give this one a try later!
If the IRR > Cost of Capital, we accept
,Profitability Index
Give this one a try later!
Ranks projects by efficiency: Payoff (Returned) /Resources Used
Budget: NPV + |initial cost|/ |initial cost|
Resource: NPV/# Resources Used
Increase in PI, Increase in efficiency
What does B measure?
Give this one a try later!
Regression Coefficient
How does the market portfolio return influence stock "i"'s returns
What are the limits of diversification?
Give this one a try later!
After 20-30 assets, we are fully diversified and we can't get rid of anymore
diversifiable risk.
Benchmark level of risk (diversified portfolio risk)
,What does Historical Risk and Return mean?
Give this one a try later!
That we are using ACTUAL data for our calculations
Increase in Net Income for the Firm
Give this one a try later!
Increase in Net Income, Increase in Dividends, Increase in Present Value,
and Increase in Stock Price
What is a return?
Give this one a try later!
The interest of % that we earn over a time period (typically a year or month)
Primary Market
Give this one a try later!
When an existing public company issues new shares of stock to raise
capital
, Finite Holding Periods
Give this one a try later!
In a multiple period setting, investors will seek to estimate all the cash flows
that the stock will generate.
Once an investor has estimated all the cash flows, they can then discount of
"capitalize" all the flows to arrive at their personal estimation of the present
value of the stock OR their Intrinsic value for the stock.
Fundamental Analysis
Give this one a try later!
One has to examine fundamental information on the firm's operations and
management to make an accurate estimation of the firm's earnings and
ultimately its dividends, future price, and return.
Internal Rate of Return (IRR)
Give this one a try later!
The internal rate of return sets the NPV of a project equal to zero. This gives
us a percentage return.
- Units are percents, so it's an interest rate
- Rate of return on every dollar invested
- Rate that sets NPV = 0
