Solved

Match the Following with the Items Below

Question 91

Matching

Match the following with the items below:

Premises:
risk
coefficient of variation
decision tree
expected value
risk-adjusted discount rate
efficient frontier
risk-aversion
coefficient of correlation
standard deviation
beta
portfolio effect
Responses:
As used in the capital budgeting process, it is changed upward or downward from the normal cost of capital to reflect the risk dimension in a given project
The degree of associated movement between two or more variables
A dislike of risk. Because of it, there must be an increased potential for return in order to induce most people to take larger risks
A tabular or graphical tool that helps to highlight the differences between investment choices.
A measure of uncertainty about the outcome from a given event
The impact of a given investment on the overall risk-return composition of the firm
A measure of the volatility of returns on an individual stock relative to the market
A measure of risk determination computed by dividing the standard deviation for a series of outcomes by the expected value
A measure of the dispersion of a set of numbers around the expected value
Is arrived at by multiplying each outcome times the associated probability and then summing up the values
A line depicting the optimum investment selections given risk-return trade-offs

Correct Answer:

risk
coefficient of variation
decision tree
expected value
risk-adjusted discount rate
efficient frontier
risk-aversion
coefficient of correlation
standard deviation
beta
portfolio effect
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