| A | B |
|---|
| when you buy an asset your gain/loss is called | return on investment |
| cash you receive directly while you own an investmnet | income component of your return |
| the value of the asset your pruchase will change, called | capital gain or capital loss |
| the real return is the rate of retrun minus the | average inflation rate |
| Rule of 72 | 13.4 percent real growth doubles your buying power about eveyr 5 yrs. |
| rate of return on treasury bills is | risk free return |
| difference between a risky return minus the risk-free return on Tbills is | excess return |
| excess return is also called a | risk premium |
| T-bills have a risk premium of | zero |
| t-bills are assumed to be | riskless |
| year to yr. returns on common stocks tend to be more___ than returns on governemtn bonds | volatile |
| a measure of how volatile a retun is called | variance |
| the square root of variance is | standard deviation |
| 2 most common measures of volatility | variance and standard deviation |
| variance essentially meausre the average squared difference between actual returns and | average returns |
| the larger the variance or standard deviation, the more | spread out the returns will be |
| another term for normal distribution | the bell curve |
| the greater the potential reward, the greater the | risk |
| growth stocks are | small company stock |
| avg. compound return per yr. over a particular period | geometric average return |
| the return in an average year over a particular period | arithmetic average return |
| geometric averages tend to be ____than arithmatic averages | smaller |
| if you are using averages calculated over long period of time up to decade, use the | arithmetic average |
| if you are doing very long forecases over decades use the | geometric average |
| if you are forecasting over a few decades, use | the average between the arithmetic and geometric average returns |
| in an efficient capital market | current market prices reflect available information |
| In an efficient capital market, the | NPV is zero |
| if a market is trong form efficient, then ___infomratoin of ___kind is reflected in stock prices | all, every |
| in a semistrong market efficiency all ____iformation is reflected in the stock prices | public |
| in a weak form efficiency market, the current price of a stock reflects | its past prices |
