Chapter 6: Objectives Inflation and rates of return How to measure risk (variance, standard deviation, beta) How to reduce risk (diversification) How to price risk (Security market line, CAPM)
Security valuation In general, the intrinsic value of an asset= the present value of the stream of expected cash flows discounted at an appropriate required rate of return
2 concepts that enhance our understanding of risk... 1) Operating Leverage affects a firm's business risk. 2) Financial Leverage affects a firm's financial risk
