10-Final

Question 1

Higher Risk

Answer 1

potential for higher return

Question 2

Lower Risk

Answer 2

usually lower return

Question 3

Dollar Returns

Answer 3

represent the actual amount of money gained or lost on an investment

Dollar Return = ending value - beginning value

Question 4

Average Return

Answer 4

the mean return over a specific period

average return = return on risky asset - risk free rate

Question 5

Risk Premium

Answer 5

the extra return that inventors demand for taking on the additional risk of investing in a risky asset compared to a risk-free asset

risk premium = return on risky asset - risk free rate

Question 6

Arithmetic Returns

Answer 6

the simple average of periodic returns over time

Question 7

Geometric Returns

Answer 7

The compound average of returns over time, which takes into account the effect of compounding

Question 8

The 3 different market efficiencies

Answer 8

1) Weak form efficiency
2) Semi-Strong efficiency
3) Strong form efficiency