High industry concentration (ie a small number of firms) High barriers to entry Low industry capacity
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AAR = average net income / average book value
The bank discount yield is based on a 360-day year. The bank discount yield is annualized with simple interest. The bank discount yield is based on the face value of the bond.
The continuously compounded return, Rt,t+1, associated with a holding period is the natural logarithm of 1 plus that holding period return: Rt,t+1 = ln(1 + r)
Cov(Ra, Rb) = STDa * STDb * Cor(a, b) ϑ^2(Rp) = (Wa^2)(ϑ^2(Ra)) + (Wb^2)(ϑ^2(Rb)) + (2)(Wa)(Wb)(Cov(Ra, Rb)) STDp = Square Root of ϑ^2(Rp)
States that at some point, as more of a resource is used in a production process, holding other inputs constant, output increases at a decreasing rate.
Stock is undervalued Investor should buy CAPM considers risk of individual stocks relative to all other alternatives in the market
Stock is overvalued Security should be sold CAPM considers risk of individual stock relative to all other alternatives in the market
a positive (linear) function of systematic risk
Vj = D1 / (k – g) Vj = value of the stock J D1 = Current Dividend times (1 + g) = D0 * (1 + g) k = The required rate of return g = The constant growth rate of dividends g = ROE * (1 – dividend payout ratio)