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7 Cards in this Set
- Front
- Back
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Why are Treasury Bonds more risky than treasury Bills?
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Because it is harder to predict what will happen in 30 years, you don't know what the market will be like. Therefore the return rate is greater as well as the risk
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Risk Premium
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the additional return that an investment must offer, relative to some alternative, because it is more risky than the alternative
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if given the average return on 2 stocks & the standard deviation of the 2 which is riskier
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the one with the smaller standard deviation is less risky because there is less room for error. the range between the return rates is smaller & therefore more predictable
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Systematic Risk
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you can not diversify away ( can never get rid of ). The market rewards Systematic risk
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Unsystematic Risk
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you can diversify it away
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components of the Total Dollar Return
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Income Stream the Investment Produces
Capital Gain or Loss |
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Diversification
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the act of investing in many different assets rather than just a few
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