FINC 349 10/29 (LIVE RECORDING)

These flashcards cover key concepts of investment strategies, risk management, and financial principles discussed in the lecture.

What are the motivations for investing according to the lecture?

The primary motivations for investing include the expectation of a return, which must compensate for associated risks.

What is the relationship between risk and return in investing?

Risk and return are closely related; generally, the more risk you take, the higher the expected return, although this does not always hold true.

What does 'price appreciation' refer to in an investment context?

Price appreciation refers to the increase in value of an asset over time, leading to potential gains when sold.

What is the holding period return?

The holding period return is the total return on an investment over a specified period, including both dividends and capital appreciation.

What is Jensen's alpha?

Jensen's alpha measures the performance of an investment compared to a market benchmark, indicating the excess return generated by the investment.

What are two types of tax shields mentioned in the lecture?

The two types of tax shields discussed are depreciation and interest expense.

Why is depreciation considered a noncash charge?

Depreciation is a noncash charge because it reflects the allocation of the cost of an asset over its useful life, without requiring an actual cash outflow during each period.

What is the principle of present value neutrality?

Present value neutrality refers to the idea that two different cash flow structures should have equivalent present values to be considered equal.

What is diversification and why is it beneficial for investors?

Diversification involves holding a variety of investments to offset risk; it benefits investors by potentially stabilizing returns and reducing overall risk.

What factors contribute to the pricing of rental properties?

The pricing of rental properties is influenced by market demand, supply levels, and occupancy rates.