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Define the following terms, using graphs or equations to illustrate your answers where feasible.

Define the following terms, using graphs or equations to illustrate your answers where feasible.

· Risk in general; stand-alone risk; probability distribution and its relation to risk

· Expected rate of return,

· Continuous probability distribution

· Standard deviation, σ; variance, σ2

· Risk aversion; realized rate of return, r

· Risk premium for Stock i, RPi; market risk premium, RPM

· Capital Asset Pricing Model (CAPM)

· Expected return on a portfolio, r^p; market portfolio

· Correlation as a concept; correlation coefficient, ρ

· Market risk; diversifiable risk; relevant risk

· Beta coefficient, b; average stock’s beta

· Security Market Line (SML); SML equation

· Slope of SML and its relationship to risk aversion

· Equilibrium; Efficient Markets Hypothesis (EMH); three forms of EMH

· Fama-French three-factor model

· Behavioral finance; herding; anchoring

Business School Assignment Instructions

Answer preview Define the following terms, using graphs or equations to illustrate your answers where feasible.

APA

1287 words

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