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Match the following with the items below:

1. The impact of a given investment on the overall risk-return composition of the firm.

2. The degree of associated movement between two or more variables.

3. A measure of uncertainty about the outcome from a given event.

4. A measure of risk determination computed by dividing the standard deviation for a series of outcomes by the expected value.

5. A measure of the dispersion of a set of numbers around the expected value.

6. As used in the capital budgeting process, it is changed upward or downward from the normal cost of capital to reflect the risk dimension in a given project.

7. Because of it, there must be an increased potential for return in order to induce most people to take larger risks.

8. A line depicting the optimum investment selections given risk-return trade-offs.

9. Is arrived at by multiplying each outcome times the associated probability and summing up the values.

10. A measure of the volatility of returns on an individual stock relative to the market.

11. A tool which helps to highlight the difference between investment choices.

Word List

standard deviation.

portfolio effect.

risk-aversion.

expected value.

risk-adjusted discount rate.

coefficient of correlation.

coefficient of variation.

beta.

decision tree.

efficient frontier.

risk.

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