Match terms with definitions

Term Answer Description Risk A. The term applied to the risk of an asset that is measured by the standard deviation of the asset's expected returns Expected rate of return B. That portion of an investment's risk calculated as the difference between its total risk and its firm-specific risk. Beta coefficient C. A model that calculates the required return on an asset as the sum of the market's risk- free rate and the asset's nondiversifiable risk. Market risk The portion of an asset's total expected return required by investors as compensation for assuming the additional risks associated with the security, the issuer, and the marketplace. Correlation coefficient (P) A measure of the sensitivity of a security's returns to fluctuations in the return earned by the market portfolio. Stand-alone risk Risk premium Diversification H. The potential for variability in the possible outcomes associated with an investment. The rate of return expected to be realized from an investment, calculated as the mean of the probability distribution of its possible returns. The value of this ranges from +1.0, denoting that two variables move up and down in perfect synchronization to -1.0, denoting that two variables move up and down in exactly opposite directions. The condition in which the expected return on a security equals its required return, and there is no pressure on its price to change. The practice of creating a portfolio of assets for the purpose of reducing the stand-alone risk of the individual assets in the portfolio. Capital Asset Pricing Model I. Equilibrium )