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5 Cards in this Set

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k^ i
k^ i = expected rate of return on the ith stock
ki
ki = required rate of return on the ith stock
k bar
k bar = realized return, after the fact
k RF
k RF = risk free rate of return
RPi = (kM - k RF) bi = (RPM ) bi
RPi = (kM - k RF) bi = (RPM ) bi = risk premium on the ith stock. The stock’s risk premium will be less than, equal to, or greater than the premium on an average stock, RPM , depending on whether its beta is less than, equal to or greater than 1.0. If the beta of stock i is equal to the beta of the average stock then risk premium for i us the same as that of the market.