Formulas Flashcards
Intrinsic value
expected return
Done = next years dividend
P= price
g = growth rate
Covariance
Standard deviation for a 2 stock portfolio
Beta
Standard deviation in a population
Deviation of a single security over a series of periods of return
Standard Deviation of a single security over a series of periods of return
CAPM
Used to determine a theoretically appropriate required rate of return of an asset
Jensen’s Alpha Model
Measures the performance of a portfolio manager to the market
Treynor Ratio
Measures the risk-adjusted performance of a portfolio manager
Duration
The length of time the discounted cash flow of a bond remains outstanding
Change of bond price
The change of price that will occur in a bond as interest rates change
Information Ratio
Measures return above benchmark divided by standard deviation
Effective Annual Return
Accounts for intra-year compounding
Taxable Equivalent Yield
Return that is required on a taxable investment to make it equal to the return on a tax-exempt
Arithmetic Mean
The average of a set of numerical values, calculated by adding them together and dividing by the
Sharpe Ratio
Measures the risk-adjusted performance of a portfolio in terms of standard deviation
Rate of Return for Period N
Holding Period Return
The total return received from holding an asset or portfolio of assets over a period of time
Geometric Mean
The central number in a geometric progression, also calculable as the nth root of a product of n
