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Definitions - Diversification is defined as “The...

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Definitions This is a list of definitions used in all the classes taught by Dr. Scott. Yield to maturity (YTM) is defined as: “That rate of discount that causes the present value of a bonds cash flows to equal its current market price.” NO other response will be considered. Risk is defined as: “The chance, likelihood, or probability that the actual outcome is different from the expected outcome.” Chance, likelihood and probability are alternatives for the same term and could be considered in any order or if only one of the alternatives is given (however, I prefer all three be given in any order). Financial Leverage is defined as: “The use of borrowed funds (at a fixed rate) to increase the rate of return to equity.” Liquidity is defined as: “The ease with which an asset can be converted into cash without significant loss of principal”.
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Unformatted text preview: Diversification is defined as: “The combination of assets with differing risk characteristics, so as to minimize the risk of the total portfolio.” Investment(s) is (are) defined as: “Foregoing current consumption in expectation of greater future consumption .” Note that the goal of investing is to maintain or maximize wealth. Beta is defined as: “A measure of relative market risk.” An Option is described (or Defined) as: the right to buy or sell a specified asset, at a specified price, over a specified period of time. A Call option gives the holder (buyer) the right to buy a specified asset, at a specified price, over a specified period of time. A Put option gives the holder (buyer) the right to sell a specified asset, at a specified price, over a specified period of time....
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