Lecture 1 Flashcards
What is investment?
current commitment of resources in the
expectation of receiving future resources
What are the two main goals of investment?
income generation
capital appreciation
What are the consideration points for required rate of return
time
inflation
risk/uncertainty
What are the categories of differences between an investor and a speculator
motivation
attitude
time
What are the methods of calculating historical return
AM (arithmetic mean)
GM (geometric mean)
What are the methods of calculating historical risk
Variance
Standard Deviation
What are the methods of calculating expected return
E(Ri) Expected return
What are the methods of calculating expected risk
Variance
Standard Deviation
What is the measure of relative variability to indicate risk per unit of expected return?
Coefficient of Variation (CV)
What are the types of risk?
Systematic risk
Unsystematic risk
What are sources of systematic risk
market risk
interest rate risk
purchasing power risk
What are the sources of unsystematic risk?
business risk
financial risk
