Examlex
Suppose you own 100 shares of IBM stock which you intend to sell today. Since you will sell it in the
secondary market, IBM will receive no direct cash flows as a consequence of your sale. Why, then,
should IBM's management care about the price you get for your shares?
Risky Asset
An asset that carries a significant possibility of losing some or all of its investment value.
Risk-free Asset
An investment that is expected to deliver guaranteed returns, with minimal to no risk of financial loss.
Arithmetic Average
The simple mean calculated by dividing the sum of a set of numbers by the quantity of numbers in the set.
Geometric Average
A method of calculating the average rate of return that accounts for compounding, often used for investment portfolios.
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