FNAN 522 ADVANCED FINANCIAL
MANAGEMENT TEST, Exams of Financial
Accounting
systematic risk - ANSWERa risk that influences a large number of assets;
cannot be eliminated; also called "market risk"; ex. war, inflation, recession,
high interest rates, confidence
unsystematic risk - ANSWERa risk that affects at most a small number of
assets; can be reduced by diversification; ex. strike, lawsuits, competition,
theft, management errors, location, marketing programs, interruption of raw
materials
beta - ANSWERthe measure of systematic risk; contribution to the riskiness of
portfolio and slope of the characteristic line
CAPM - ANSWERCapital Asset Pricing Model, a linear model that relates risk
and return of all assets: Re = Rf + Beta(Rm-Rf).
SML - ANSWERSecurity Market Line, a graphical representation of the CAPM;
shows the relationships between systematic risk (beta) and expected
(required) return
risk averse - ANSWERhaving a low tolerance for risk; there has to be an
increase return for the investors to compensate for an increase in risk
, annuity - ANSWERa series of equal regular deposits (payments) over a
specified time period
annuity due - ANSWERan annuity for which the cash flows occur at the
beginning of the period
bond - ANSWERa long-term debt instrument used by business and
government to raise large sums of money, generally from a diverse group of
lenders
preferred stock - ANSWERa special type of stock whose owners, though not
generally having a say in running the company, have a claim to profits before
other stockholders do
common stock - ANSWERcorporation's basic ownership share; also
generically called capital stock
gordon model - ANSWERa stock valuation model that determines the value of
a stock based on a future stream of dividends growing at a constant rate
forever
diversification - ANSWERa strategy of increasing sales by introducing new
products into new markets
risk - ANSWERdegree of uncertainty of return on an asset; in business, the
likelihood of loss or reduced profit
MANAGEMENT TEST, Exams of Financial
Accounting
systematic risk - ANSWERa risk that influences a large number of assets;
cannot be eliminated; also called "market risk"; ex. war, inflation, recession,
high interest rates, confidence
unsystematic risk - ANSWERa risk that affects at most a small number of
assets; can be reduced by diversification; ex. strike, lawsuits, competition,
theft, management errors, location, marketing programs, interruption of raw
materials
beta - ANSWERthe measure of systematic risk; contribution to the riskiness of
portfolio and slope of the characteristic line
CAPM - ANSWERCapital Asset Pricing Model, a linear model that relates risk
and return of all assets: Re = Rf + Beta(Rm-Rf).
SML - ANSWERSecurity Market Line, a graphical representation of the CAPM;
shows the relationships between systematic risk (beta) and expected
(required) return
risk averse - ANSWERhaving a low tolerance for risk; there has to be an
increase return for the investors to compensate for an increase in risk
, annuity - ANSWERa series of equal regular deposits (payments) over a
specified time period
annuity due - ANSWERan annuity for which the cash flows occur at the
beginning of the period
bond - ANSWERa long-term debt instrument used by business and
government to raise large sums of money, generally from a diverse group of
lenders
preferred stock - ANSWERa special type of stock whose owners, though not
generally having a say in running the company, have a claim to profits before
other stockholders do
common stock - ANSWERcorporation's basic ownership share; also
generically called capital stock
gordon model - ANSWERa stock valuation model that determines the value of
a stock based on a future stream of dividends growing at a constant rate
forever
diversification - ANSWERa strategy of increasing sales by introducing new
products into new markets
risk - ANSWERdegree of uncertainty of return on an asset; in business, the
likelihood of loss or reduced profit
