Formulas

Question 1

Answer 1

Intrinsic value

Question 2

Answer 2

expected rate of return

Question 3

Answer 3

Covariance

Question 4

Answer 4

Portfolio deviation formula
Standard deviation for a 2 stock portfolio

Question 5

Answer 5

Beta

Question 6

Answer 6

Standard deviation in a population
Deviation of a single security over a series of periods of return

Question 7

Answer 7

Standard Deviation of a Sample
Deviation of a single security over a series of periods of return

Question 8

Answer 8

CAPM
Used to determine a theoretically appropriate required rate of return of an asset

Question 9

Answer 9

Jensen Model
Measures the performance of a portfolio manager to the market

Question 10

Answer 10

Treynor Ratio
Measures the risk-adjusted performance of a portfolio manager

Question 11

Answer 11

Duration
The length of time the discounted cash flow of a bond remains outstanding

Question 12

Answer 12

Change of bond price
The change of price that will occur in a bond as interest rates change

Question 13

Answer 13

Information Ratio
Measures return above benchmark divided by standard deviation

Question 14

Answer 14

Effective Annual Return
Accounts for intra-year compounding

Question 15

Answer 15

Taxable Equivalent Yield
Return that is required on a taxable investment to make it equal to the return on a tax-exempt

Question 16

Answer 16

Arithmetic Mean
The average of a set of numerical values, calculated by adding them together and dividing by the

Question 17

Answer 17

Sharpe Ratio
Measures the risk-adjusted performance of a portfolio in terms of standard deviation

Question 18

Answer 18

Rate of Return for Period N

Question 19

Answer 19

Holding Period Return
The total return received from holding an asset or portfolio of assets over a period of time

Question 20

Answer 20

Geometric Mean
The central number in a geometric progression, also calculable as the nth root of a product of n