I.Stand-alone risk 1) Expected rate of return ( ) a weighted average of the various possible outcomes; The tighter (or more peaked) a distribution, the more likely it is that the actual outcome will be close to the expected value & the less likely i
1. Features of a bond: A. Par value face amount of the bond which is paid at maturity B. Coupon interest rate stated interest rate (generally fixed) paid by the issuer. Coupon interest rate par value = interest payment C. Maturity date years unti
1. Returns
A. Return = (amount received amount invested)/amount invested B. Realized return - the return received when bought & held until maturity
investors to hold riskier securities 3. standard deviation A. To calculate:
(a) Expected rate of re