FNAN 300 - TEST 2 2022 NEW UPDATED EXAM PTACTICRE MATERIAL.

FNAN 300 - TEST 2 2022 NEW UPDATED EXAM PTACTICRE MATERIAL systematic risk - nondiversifiable risk * cant be eliminated (market risk) t * MACRO - market/economy * factors that systematically affect all firms : wars, ...

FNAN 300 - TEST 2 2022 NEW UPDATED EXAM PTACTICRE MATERIAL systematic risk - nondiversifiable risk * cant be eliminated (market risk) t * MACRO - market/economy * factors that systematically affect all firms : wars, inflation, recession, high interest rates, confidence, covid-19 market risk - systematic (nondiversifiable) risk that cant be eliminated unsystematic risk - diversifiable risk * can be reduced by Diversification ; unique to a company * MICRO - FIRM * strike, interruption of raw materials, lawsuits, competition, theft, marketing programs, management errors, location Beta - measure of systematic risk (contribution to the riskiness of portfolio) slope of the characteristic line One - the markets Beta is ALWAYS ________ CAPM (Capital Asset Pricing Model) - predicts the expected required return based on systematic (nondiversifiable) risk SML (security market line) - shows the relationship between systematic risk and expected return risk and return have a positive relationship Risk Averse - avoid risk Annuity - Payment has to be the same amount received consecutively This study source was downloaded by 100000840275362 from CourseHero.com on 04-29-2022 08:28:34 GMT -05:00 https://www.coursehero.com/file/142082088/FNAN-300-TEST-2-2022-NEW-UPDATED-EXAM-PTACTICRE-MATERIALpdf/ Annuity Due - the first cash flow occurs now Bond - Preferred Stock - hybrid > part debt / part equity Common Stock - Gordon Model - what is the best approach for Valuation? Gordon Model - Diversification - reduces risk by having more than one stock in the portfolio Risk - used interchangeably with uncertainty ; the variability in returns for a given asset C.V. (Coefficient of Variation) - a measure of relative dispersion that is useful in comparing the risks of assets with differing expected returns Standard Deviation - the most common statistical indicator of an assets risk; it measures the dispersion around the expected value Portfolio - a collection, or group, of assets basic valuation model/equation - characteristic line - characterizes the risk of a firm's systematic risk found by simple linear regression aka "best fit line" This study source was downloaded by 100000840275362 from CourseHero.com on 04-29-2022 08:28:34 GMT -05:00 https://www.coursehero.com/file/142082088/FNAN-300-TEST-2-2022-NEW-UPDATED-EXAM-PTACTICRE-MATERIALpdf/ perpetuity - an annuity with an infinite life providing continual annual cash flow real rate of interest - rate that creates equilibrium between the supply of savings and the demand for investment, where there is no risk nominal rate of interest - actual rate of interest charged by supplier and paid by demander yield curve - a graphic depiction of the term structure of interest rate