Chapter 8 Flashcards Preview

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Flashcards in Chapter 8 Deck (4)
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1
Q

Stand-Alone Risk:

A

Probability of not getting an expected return for an individual company.

2
Q

Risk in a Portfolio Context:

A

How much an individual member of a portfolio contributes to the Portfolio’s Risk.

3
Q

Return:

A

The potential future cash income and change in the cash value of an investable assets (financial or business assets)

  • For Common Stocks: dividends and change in the price per share.
  • For a Company: Free Cash Flow (total company or individual projects) and the change in its cash value.
4
Q

Diversification:

A

Means the Standard Deviation of the Portfolio can be lower than the Standard Deviations of the Portfolio’s members.