Chapter 8

Question 1

What is ex post and ex ante returns?

Answer 1

Ex post returns past or historical returns

Ex ante returns future or expected returns

Question 2

What is income yield?

Answer 2

The income yield is the return earned in the form of a periodic cash flow received by the investors.

Question 3

What is the relationship between Canada bond yields and rates of inflation?

Answer 3

The high level of long Canada bond yields coincided with the very high rates of inflation

Question 4

How to calculate the total return?

Answer 4

Total return income yield plus the capital gain (or loss) yield

Question 5

What does it mean “to mark to market”?

Answer 5

Mark to market carrying securities at the current market value regardless of whether they are sold

Question 6

What is the difference between arithmetic and geometric mean?

Answer 6

Arithmetic mean or arithmetic average the most commonly used value in statistics; the sum of all returns divided by the total number of observations.

Geometric mean the average or compound growth rate over multiple time periods.