Corporate Finance - Ross, Westerfield A+ GRADE Compiled Questions and CORRECT Answers

Risk Premium - the excess return required from an investment in a risky asset over that required from a risk-free investment Variance - the average squared difference between the actual return and the average return Standard Deviation - the positive square root of variance Normal Distribution - a symmetric, bell-shaped frequency distribution that is completely defined by its mean and standard deviation Geometric Average Return - the average compound return earned per year over a multiyear period Arithmetic Average Return - the return earned in an average year over a multi-year period Efficient Capital Market - a market in which security prices reflect available information Efficient Markets Hypothesis (EMH) - the hypothesis that actual capital markets, such as NYSE, are efficient Blume's Formula - combining two averages of geometric and artithmetic risk free return - rate of return on debt excess return on average risky asset - difference between risk free return and risky return Dividend yield - how many dividends we get for each dollar invested Capital gains yield - how much capital gains we get for each dollar invested Total Dollar Return - Dividend income+ Capital gain/loss Total cash if stock is sold - Initial investment+Total Return Percentage Return - Dividend yield + Capital Yield