Discussion5.docx - 1 Required rate of return(RRR refers to...

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1. Required rate of return (RRR) refers to the absolute minimum amount of return on investment that is required for the investment to be advantageous (Levinson, 2018). Expected rate of return (ERR) is the amount of return that an investment is estimated to make, and is calculated based on probability (Levinson, 2018). Hopefully, ERR and RRR are different, if so, that means there is a high likelihood that an investment will return profitable. 2. In relation to ERR described above, holding period return (HPR) refers to the amount of return on an investment over a specific period of time (Risk & return, n.d.). This period can range from days to years. Expected return has no fixed period, and therefore changes based on risk factors influencing probability. HPR is a specific amount that has been earned over the period of time that an investment was held. 3. Having multiple investments in a portfolio reduces risk by lowering the standard deviation, a principle known as diversification (Diversification, n.d.). Calculating the correlation coefficient
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  • Spring '16
  • Levinson

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