WGU C708 unit 4 latest 2022 already passed

WGU C708 unit 4 latest 2022 already passed The required rate of return (RRR) ✔✔the minimum annual percentage earned by an investment that will induce individuals or companies to put money into a particular security or ...

WGU C708 unit 4 latest 2022 already passed The required rate of return (RRR) ✔✔the minimum annual percentage earned by an investment that will induce individuals or companies to put money into a particular security or project Yield ✔✔dividend, interest or return the investor receives from a security like a stock or bond, usually reported as an annual figure Interest Rates ✔✔The cost of borrowing money. interest charged by a lender such as a bank on a loan Annual Percentage Rate (APR) ✔✔the annual rate charged for borrowing or earned through an investment, expressed as a percentage that represents the actual yearly cost of funds over the term of a loan Effective APR ✔✔The amount you pay after fees and compound interest have been added to the charges premium ✔✔the price above par value at which a security is sold market interest rate ✔✔rate at which interest is paid by a borrower for the use of money that they borrow from a lender in the market Liquidity ✔✔availability of cash over the short term; ability to service short-term debt Deferred consumption ✔✔When money is loaned, the lender delays spending the money on consumption goods time preference theory ✔✔people prefer goods now to goods later. In a free market there will be a positive interest rate Inflationary expectations: ✔✔Most economies generally exhibit inflation, meaning a given amount of money buys fewer goods in the future than it will now. The borrower needs to compensate the lender for this. If the inflationary expectation goes up, then so does the market interest rate and vice versa The expectation hypothesis of the term structure of interest rate ✔✔the proposition that the longterm rate is determined by the market's expectation for the short-term rate plus a constant risk premium The liquidity premium theory ✔✔asserts that long-term interest rates not only reflect investors' assumptions about future interest rates but also include a premium for holding long-term bonds segmented market hypothesis ✔✔financial instruments of different terms are not substitutable; therefore supply and demand in the markets for short-term and long-term instruments is determined largely independently Liquidity premium ✔✔a term used to explain a difference between two types of financial securities (e.g., stocks), that have all the same qualities except liquidity Term structure of interest rates ✔✔the relationship between the interest on a debt contract and the maturity of the contract. Yield Curve ✔✔a line that plots the interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates Cost-push inflation ✔✔When prices rise due to an increase in the cost of production. Demand-Pull Inflation ✔✔increases in the price level (inflation) resulting from an excess of demand over output at the existing price level, caused by an increase in aggregate demand hyperinflation ✔✔A very rapid rise in the price level; an extremely high rate of inflation. Stagflation ✔✔a period of slow economic growth and high unemployment (stagnation) while prices rise (inflation) deflation ✔✔A situation in which prices are declining Cost-push inflation ✔✔When prices rise due to an increase in the cost of production. Demand-pull inflation ✔✔increases in the price level (inflation) resulting from an excess of demand over output at the existing price level, caused by an increase in aggregate demand Monetary policy ✔✔the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability Crowding out ✔✔a decrease in investment that results from government borrowing The Time Value of Money ✔✔concept that money is worth more today that it is in the future Interest Rate (i or r) ✔✔the cost of not having money for one period, or the amount paid on an investment per year Future Value (FV) ✔✔the value of the money in the future Present Value (PV) ✔✔the value of the money today five components of the Time Value of Money ✔✔1.)discount rate 2.)duration 3.) payment 4.)present value 5.)future value Discounting ✔✔the process of determining how much money paid/received in the future is worth today. You discount future values of cash back to the present using the discount rate Periods (t or n) ✔✔units of time. Usually one year. Simple Interest ✔✔interest paid on the principal alone Effective Annual Rate (EAR) ✔✔a measurement of how much interest actually accrues per year if it compounds more than once per year Beta ✔✔a measure firms can use in order to determine an investment's return sensitivity in relation to overall market risk Political risk ✔✔the potential loss for a company due to nonmarket factors as macroeconomic and social policies Systematic risk ✔✔the risk associated with an asset that is correlated with the risk of asset markets generally, often measured as its beta Inflation ✔✔an increase in the general level of prices or in the cost of living. Risk aversion ✔✔the reluctance to accept a bargain with an uncertain payoff rather than another bargain with a more certain, but possibly lower, expected payoff 3 levels of Risk aversion ✔✔1.)Risk-averse or risk-avoiding 2.)Risk-neutral 3.)Risk-loving or risk-seeking variable-rate mortgage, adjustable-rate mortgage (ARM), or tracker mortgage ✔✔a mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets. Expected return ✔✔potential investment can be computed by computing the product of the probability of a given event and the return in that case and adding together the products in each discrete scenario. Expected value ✔✔of a random variable is the weighted average of all possible values that this random variable can take on. Variance ✔✔is a term used to measure the degree of risk in an investment. It is calculated by finding the average of the squared deviations from the mean rate of return Standard deviation ✔✔the square root of the variance