Finance Exam 2 Flashcards

1
Q

expected inflation premium =

A

IP= I - RFR

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2
Q

Fair interest rate =

A

(IP + RFR + DRP + LRP +SCP + MP)

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3
Q

Current Rate =

A

[(1 + current %)(1 + next year %)] ^ 1/2 - 1

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4
Q

cost of shares =

A

ask price (# of shares)

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5
Q

stock price (Pn) =

A

P/E ratio (earnings per share)

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6
Q

dollar return=

A

(ending value - beginning value) + income

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7
Q

percentage return

A

dollar return / previous year per share price

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8
Q

risk premium =

A

beta (market return - risk free rate)

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9
Q

required return =

A

(D1/Po) + g

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10
Q

market risk premium=

A

(annual return from n1-n2) - avg annual T-Bill yield

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11
Q

equivalent taxable yield

A

muni yield/ (1-tax rate)

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12
Q

(1 + nominal) =

A

(1 + real)(1 + inflation)

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13
Q
A
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