Risk, Return, And The Historical Record Flashcards
1
Q
Nominal interest rate
A
The interest rate in terms of nominal (not adjusted for purchasing power) dollars
2
Q
Real interest rate
A
The excess of the interest rate over the inflation rate. The growth rate of purchasing power derived from an investment.
3
Q
Effective annual rate (EAR)
A
Interest rate annualized using compound rather than simple interest
4
Q
Annual percentage rate (APR)
A
Interest rate is annualized using simple rather than compound interest
5
Q
Dividend yield
A
The percent rate of return provided by a stock’s dividend payments
6
Q
Risk-free rate
A
The interest rate that can be earned with certainty
7
Q
Risk premium
A
An expected return in excess of that on risk-free securities. The premium provides compensation for the risk of an investment.
