Finance Midterm #2

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  1. Systematic Risk
    the failure of one company leads to the failure of others, ths risk can't be diversified away.
  2. Risk
    the potential for unexpected events to occur.
  3. risk aversion
    the tendency to avoid additional risk.
  4. risk-return relationship
    most people will demand a higher rate of return if there is a higher risk.
  5. uncertainty
    chance, or probability, of an unexpected outcome.
  6. expected return
    the mean of the probability distribution of possible outcomes.
  7. risk tolerant
    more willing to take on risk.
  8. What does standard devieation indicate?
    the likelihood that an outcome different from what's expected will occur.
  9. standard deviation
    a numerical indicator of how widely dispersed the possible values are around a mean.

    more dispersed = higher std. dev. = more risk
  10. Expected Value (Mean) Equation
    mu = Sum(V x P)
  11. Standard Deviation Formula
    sigma = SQRT[Sum P(V - mu)2]
Card Set
Finance Midterm #2
SJSU BUS 170 Finance midterm #2
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