ESSENTIALS OF INVESTMENTS CH. 1 –
5 QUESTIONS WITH CORRECT
ANSWERS 2024
Holding-period return - CORRECT ANSWER -rate of return over a given investment period
dollar weighted average return - CORRECT ANSWER -the internal rate of return on an investment
scenario analysis - CORRECT ANSWER -
process of devising a list of possible economic scenarios and specifying the likelihood of each one, as
well as the HPR that will be realized in each case.
probability distribution - CORRECT ANSWER -list of possible outcomes with associated probabilities
expected return - CORRECT ANSWER -the mean value of the distribution of HPR
variance - CORRECT ANSWER -the expected value of the squared deviation from the mean
value at risk (VaR) - CORRECT ANSWER -measure of downside risk.
kurtosis - CORRECT ANSWER -measure of the fatness of the tails of a probability distribution.
skew - CORRECT ANSWER -measure of the asymmetry of a probability distribution
risk-free-rate - CORRECT ANSWER -the rate of return that can be earned with certainty
risk premium - CORRECT ANSWER -an expected return in excess of that on risk-free securities
excess return - CORRECT ANSWER -rate of return in excess of the risk-free-rate
, risk aversion - CORRECT ANSWER -reluctance to accept risk
sharpe measure - CORRECT ANSWER -ratio of portfolio risk premium to standard deviation
mean-variance analysis - CORRECT ANSWER -ranking portfolios by their sharpe measures
inflation rate - CORRECT ANSWER -the rate at which prices are rising
nominal interest rate - CORRECT ANSWER -the interest rate in terms of nominal dollars
real interest rate - CORRECT ANSWER -the excess of the interest rate over the inflation rate.
complete portfolio - CORRECT ANSWER -the entire portfolio including risky and risk-free assets
Primary Market - CORRECT ANSWER -Market for new issues of securities.
Secondary Market - CORRECT ANSWER -Market for already-existing securities.
Initial Public Offering (IPO) - CORRECT ANSWER -First sale of stock by a formerly private company.
Underwriters - CORRECT ANSWER -
Underwriters purchase securities from the issuing company and resell them.
Prospectus - CORRECT ANSWER -A description of the firm and the security it is issuing.
Private Placement - CORRECT ANSWER -
Primary offerings in which shares are sold directly to a small group of institutional or wealthy investors
.
5 QUESTIONS WITH CORRECT
ANSWERS 2024
Holding-period return - CORRECT ANSWER -rate of return over a given investment period
dollar weighted average return - CORRECT ANSWER -the internal rate of return on an investment
scenario analysis - CORRECT ANSWER -
process of devising a list of possible economic scenarios and specifying the likelihood of each one, as
well as the HPR that will be realized in each case.
probability distribution - CORRECT ANSWER -list of possible outcomes with associated probabilities
expected return - CORRECT ANSWER -the mean value of the distribution of HPR
variance - CORRECT ANSWER -the expected value of the squared deviation from the mean
value at risk (VaR) - CORRECT ANSWER -measure of downside risk.
kurtosis - CORRECT ANSWER -measure of the fatness of the tails of a probability distribution.
skew - CORRECT ANSWER -measure of the asymmetry of a probability distribution
risk-free-rate - CORRECT ANSWER -the rate of return that can be earned with certainty
risk premium - CORRECT ANSWER -an expected return in excess of that on risk-free securities
excess return - CORRECT ANSWER -rate of return in excess of the risk-free-rate
, risk aversion - CORRECT ANSWER -reluctance to accept risk
sharpe measure - CORRECT ANSWER -ratio of portfolio risk premium to standard deviation
mean-variance analysis - CORRECT ANSWER -ranking portfolios by their sharpe measures
inflation rate - CORRECT ANSWER -the rate at which prices are rising
nominal interest rate - CORRECT ANSWER -the interest rate in terms of nominal dollars
real interest rate - CORRECT ANSWER -the excess of the interest rate over the inflation rate.
complete portfolio - CORRECT ANSWER -the entire portfolio including risky and risk-free assets
Primary Market - CORRECT ANSWER -Market for new issues of securities.
Secondary Market - CORRECT ANSWER -Market for already-existing securities.
Initial Public Offering (IPO) - CORRECT ANSWER -First sale of stock by a formerly private company.
Underwriters - CORRECT ANSWER -
Underwriters purchase securities from the issuing company and resell them.
Prospectus - CORRECT ANSWER -A description of the firm and the security it is issuing.
Private Placement - CORRECT ANSWER -
Primary offerings in which shares are sold directly to a small group of institutional or wealthy investors
.
