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low risk, low reward
-considered to be risk free |
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the income return on an investment.
This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment's cost, its current market value or its face value. |
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| A coupon payment on a bond is a periodic interest payment that the bondholder receives during the time between when the bond is issued and when it matures. |
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| stock that entitles the holder to a fixed dividend, whose payment takes priority over that of common-stock dividends. |
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| wealth in the form of money or other assets owned by a person or organization or available or contributed for a particular purpose such as starting a company or investing. |
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| A stock or any other security representing an ownership interest. This may be in a private company (not publicly traded), in which case it is called private equity |
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| anyone who owns shares in the company. |
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| cost of equity + cost of debt. |
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| the return that investors holding shares in a firm require. |
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determines how volatile a stock is.
A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market. |
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is the portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability.
= (net income - dividends on Preferred Stock)/ (average outstanding shares) |
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| stock that entitles the holder to a fixed dividend, whose payment takes priority over that of common-stock dividends. |
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the number of shares outstanding represents the amount of stock on the open market, including shares held by institutional investors and restricted shares held by insiders and company officers.
Read more: Outstanding Shares Definition | Investopedia http://www.investopedia.com/terms/o/outstandingshares.asp#ixzz43JqKs2iS
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| shares entitling their holder to dividends that vary in amount and may even be missed, depending on the fortunes of the company. |
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| the nominal value of a bond, share of stock, or a coupon as indicated in writing on the document or specified by charter. |
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weighted average cost of capital.
Financing a project with both debt and equity.
Rb= debt
Rs= equity |
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| Standard Deviation when measuring mean (average return) |
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The spread, or dispersion, of a distribution is a measure of how much a particular return can deviate from the mean return.
So, a high standard deviation means it deviates from the average return a lot and a low means it doesn't differentiate from the average return.
Large distributions mean uncertain returns (could be really high positive or could be negative).
returns are more certain for lower standard deviations.
standard deviation is a form of measurement of risk.
square root of variance
sd/o |
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calculated as:
risk premium of an asset/ standard deviation
it is a measure of return of the level of risk taken. risk, of course, measured as standard deviation.
referredas the risk-to-reward ratio. where reward is the average excess return and the risk is the standard deviation. |
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symmetric, bell-shaped curve. not skewed.
-the probbiliy of having a return that is within one standard deviation of the mean of the distribution is .68
- probability of having a return that is within two standard deviations of the mean is .95. |
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