Revision (202301)

What is return ?

• Rewards for investing

• Wealth

• Uncertainty

• Funds

What is risk?

• Rewards of investing

• Level of profit

• Uncertainty

• Increase value of the investment

What is risk return tradeoff?

• High risk, low return; low risk, high return

• Risk equal to return

• Risk need to be higher than return

• High risk, High return; Low risk, Low return

What is spot market?

• Commodities or securities market in which

  goods are sold for cash and delivered immediately

• An agreement between buyer and seller to

  exchange certain asset at a predetermined price in the future.

• A physical or virtual marketplace for buying, selling and

  trading raw or primary products.

• The environment in which the issuance and trading of debt

  securities occurs.

What is future market ?

• Commodities or securities market in which

  goods are sold for cash and delivered immediately.

• An agreement between buyer and seller to

  exchange certain asset at a predetermined price in the future.

• The environment in which the issuance and trading of debt

  securities occurs.

• The physical or virtual marketplace for buying, selling and

  trading raw or primary products.

What is realized return ?

• Return actually received by an investor during the given return period.

• A capital gain made only

  on paper.

• Loss actually faced by investor during investment period.

• A capital gain made only on paper.

What is paper return ?

• Return actually received by an investor during the given return period.

• A capital gain made only

  on paper

• Loss actually faced by an investor during investment period.

• A capital loss made only on paper.

What is capital gain?

• Selling price > Purchasing price

• Selling price < Purchasing price

• Selling price = Purchasing price

• Depreciation of the price of assets

Define risk adverse investor.

• Investors accept a lower return in exchange

  for greater risk. This tradeoff is negative. Investors

  enjoy risk and are therefore willing to accept lower

  returns for increasing levels of risk.

• Investors require greater return in exchange

  for each unit of additional risk. The tradeoff is positive. Return must

  increase as risk increases.

• Additional return an investor requires on an

  investment to compensate for higher risks based

  upon issue and issuer characteristics.

• Does not required any return.

Define Risk-taking investor.

• Investors accept a lower return in exchange

  for greater risk. This tradeoff is negative; such investors

  enjoy risk and are therefore willing to accept lower

  returns for increasing levels of risk.

• Require greater return in exchange

  for each unit of additional risk. Because they shy away

  from risk, the tradeoff here is positive; return must

  increase as risk increases.

• Additional return an investor requires on an

  investment to compensate for higher risks based

  upon issue and issuer characteristics.

• Does not required any return.