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100

a grouping of different financial investment types

What is a Portfolio?

100

the possibility of losing some, if not all, of an investment

What is Risk?

100

ideally the gain on an investment, but may be a loss; the higher the risk, the higher the return

What is Return?

100

a single investment is more risky than a combination of investments.

What is the main premise of the Modern Portfolio Theory?

200

money invested by an investor in new or small businesses that may have high growth potential, risky investment for the venture capitalist

What is Venture Capital?

200

diversification, or spreading out investments to try to balance risk and reward in a portfolio

What is Asset Allocation?

200
  • the calculation of the measurement of risk involved, can be reduced through diversification

What is Variance?

200

can help to reduce risk which is a goal of investors.

What is the benefit of using and investment model to value securities?

300

a grouping of individual securities that investors can purchase shares in while being managed by a fund manager for a fee

What are Mutual Funds?

300

how a stock performs relative to the industry as a whole

What is Beta?

300

basically a loan that a government entity or corporation makes to investors with the promise to pay back the amount plus interest at a later date

What are Bonds?

300

takes into consideration the individual betas of each of the stocks in a portfolio and not just an average beta for the entire portfolio. Have students in pairs search for the betas of five different companies and write them down separately. Then take an average of the five and write that down.

What is Arbitrage Pricing?

400

companies whose market capitalization (the number of outstanding shares multiplied by the price per share) is greater than $10 billion

What are Large Cap Stocks?

400

companies whose market cap. is between $2 and $10 billion

What are Mid-Cap Stocks?

400

companies whose market cap is less than $2 billion but greater than $300 million

What are Small Cap Stocks?

400
  • Assumes there is market risk but still diversifies
  • The risk on one stock or investment is greater than a combination of investments.

What is Modern Portfolio Theory?

500

emphasizes diversification of assets to balance out the risk in a portfolio

What is Modern Portfolio Theory?

500

a pricing model for riskier investments that generates a higher expected rate of return

What is Capital Asset Pricing Model?

500

assumes an investment may not be priced accurately so it looks at past performance of the investment itself as opposed to the whole market

What is Arbitrage Pricing Theory?

500
  • Used for pricing risky securities
  • Includes a return for a risk‐ free security in addition to a premium for a risky security.
  • Uses beta as a measure of risk
  • Includes risk that cannot be eliminated through diversifying
  • Includes risk that can be reduced through diversifying

What is Capital Asset Pricing Model?