Main course page
  • General

  • Chapter 6 – Risk and Return_Part 2

    Chapter 6 and 7 provides an explanation of the relationship between risk and return. Every investment decision carries a certain amount of risk. Therefore, the role of the financial manager is to understand how to calculate the "riskiness" of an investment so that he or she can make sound financial and business decisions. This relationship between risk and return is explained in this lesson. Specifically, student will learn how to compute the level of risk by calculating expected values and the standard deviation. Also, student will learn about handling risk in a portfolio with different investments and how to measure the expected performance of a stock investment when it is being affected by the overall performance of a stock market.

    Here are the main topics to be covered in Chapter 7 (Week 9):

    • Diversification and Portfolio Risk
    • Systematic Risk and Beta
    • The Security Market Line
    • The SML and the Cost of Capital: A Preview

    LEARNING OUTCOMES

    By the end of this lesson, student should be able to:

    • Discuss the systematic risk principle.
    • Describe security market line and the risk-return trade-off.


    REQUIRED READINGS

    Chapter 6: Risk and Return

    Brigham E. and Houston J. Fundamentals of Financial Management. 14th ed., South-Western College Pub., 2016.

    Chapter 8: Risk and Return

    Titman, Keown, A. J. and Martin, J.D. (2018). Financial Management, (13th ed). Principles and Applications, Pearson Education.

    • View
Chapter 6 – Risk and Return_Part 1Chapter 7 – Bond Valuations_Part 1