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Chapter 6
Sandra wants to invest her money to increase it, so she buys stocks in a company. Sanda will make money if the company does well because her stocks will ...
Returns in a financial context refer to the change in price of an asset, investment, or project over a specified period. A positive return represents ...
Risk in finance refers to the potential of losing money or facing unexpected outcomes in investment and economic activities. Risks are broadly categorized ...
Systematic risk is fundamental to the market, reflecting the impact of economic, financial, and geopolitical factors. This risk affects the entire market, ...
Unsystematic risk relates to the uncertainty associated with individual companies or sectors, not affecting the entire stock market or economy. There are ...
Expected returns are the anticipated profit or loss from an investment over a certain period. Expected Returns are predictions based on historical data, ...
The relationship between risk and return is fundamental in financial theory and is linked to investment decision-making. The risk refers to the ...
Variance is a measure that reflects the degree of risk in an investment's returns. It provides insight into the variation of investment returns from ...
Standard deviation is a measure quantifying the degree of variation in a set of values. Consider Peter. He has invested in Stock A and Stock B for a ...
The risk premium is the additional return an investor requires, to invest in a riskier asset than a risk-free investment. It is a compensation for the ...
Beta is a measure of assessing an investment's risk and expected return compared to the overall market, represented by the slope of the line in a ...
The Security Market Line, or SML is a graphical representation used to depict the relationship between the expected return of an investment and its risk, ...
The capital asset pricing model, or CAPM, is a financial model that calculates the expected rate of return for an investment. CAPM calculates the expected ...
The Capital Asset Pricing Model, or CAPM, evaluates investment risk and determines expected returns based on a security's relationship to the market. ...
Portfolio risk and returns refer to the potential risks undertaken and the rewards achieved from investments. The risk associated with a portfolio refers ...
Diversification is a risk management strategy that spreads investments across various financial instruments, industries, and other categories to reduce ...
Diversification is an important strategy in portfolio management used to reduce risk by allocating investments across various financial assets, ...
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