Ch. 12 Risk, Return, and Capital Budgeting Flashcards
0
Q
Beta
A
Sensitivity of a stock’s return to the return on the market portfolio
1
Q
Market portfolio
A
Portfolio of all assets in the economy.
2
Q
Market risk premium
A
Rm-Rf
3
Q
Capital assets pricing model
A
R=rf+b(rm-rf)
4
Q
Security market line
A
Relationship between expected return and beta
5
Q
Company and cost of capital
A
Expected rate of return demanded by investors in a company determined by the average risk of the company’s securities
6
Q
Project cost of capital
A
Minimum acceptable expected rate of return on a project given its risk.
