4-16-08 (ch10)

4-16-08 (ch10) - risk) Market risk economy wide risk that...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
4/16/2008 Notes CH10 Percentage return (%) = (capital gain (loss) + dividend) / initial share price For stock = (P1- P0) / P0 + Div / P0 Nominal vs. real 1+ real rate of return = 1+ nominal rate of return / 1+ inflation rate Expected return = interest on treasury bills + risk premium Variance – average value of squared deviations from the mean - measures volatility Diversification – strategy designed to reduce risk by spreading your investment over (across) many investments Unique risk could be eliminated – risk factors that affect a specific stock (Diversifiable
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: risk) Market risk economy wide risk that affects a entire market (Non diversifiable risk or systematic risks) Portfolio rate of return = (fraction of portfolio in 1 st asset class * rate of return on 1 st asset class) + (fraction of portfolio in 2nd asset class * rate of return on 2nd asset class)-could be more than 2 CH 10 questions for early bird points Due 4-21-08...
View Full Document

Ask a homework question - tutors are online