Fin251

Lecturer seems to be going through an example of the last question of the assignment. Calculating the weighted discount rate. More examples of calculating mean, variance and standard deviation.

Risk premiums: maturity is the extra return from a long term security, market premium is the return on stocks in excess of risk free return. Risk adverse: taking in risk for higher return. Diversification: spreading risk among different investment. Unique risk: unsystematic,
risk affecting only one firm. Market risk: systematic, economy wide sources of risk that affects the overall stockmarket.

Market risk is the only risk you should be compensating for because a diversified portfolio should already be compensating for unique risk.

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