Formulas Flashcards

1
Q

Utility function

A

E(R)-0.5A sigma^2

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2
Q

CML

A

R= risk free + ((market-risk free)/sigma m) * sigma p

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3
Q

Sharpe ratio portfolio

A

(market- risk free) / sigma m

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4
Q

Treynor ratio

A

(portfolio - risk-free) / beta

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5
Q

Sharpe CAPM

A

(portfolio - risk-free)/sigma p

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6
Q

SML

A

R = risk free + (market- risk free)*beta

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7
Q

Estimated return

A

= (P1+Div1-P0)/P0

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8
Q

How to tell if under-priced

A

estimated - expected > 0

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9
Q

IR ratio

A

(portfolio-benchmark)/sigma er

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10
Q

Sortino

A

(Rp - T)/DR

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11
Q

Downside risk

A

1/n sum (R- mean R)^2 for all R less than mean

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12
Q

APT

A

risk-free + sum of beta*lambda

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13
Q

Price of bond

A

C*(1/r - 1/r(1+r)^t) + FV/(1+r)^t

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14
Q

present value for perpetuity

A

Cash flow/return

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15
Q

Current yield

A

Coupon / Price

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16
Q

Fisher relation

A

(1+R)=(1+r)*(1+h)

17
Q

Zero growth price

A

Div/r

18
Q

Constant (Pt)

A

Divt*(1+g)/(r-g)

19
Q

Non-constant P0

A

D1/1+r + D2/(1+r)^2 + D3/(1+r)^3 + P3/(1+r)^3

20
Q

WACC

A

cost of equityweight of equity + cost of debtweight of debt*(1-tax rate)

21
Q

Value of a firm

A

V= c/WACC

22
Q

Expected return on asset with capital structure

A

Ra= (D/D+E)Rd +(E/E+D)Re

23
Q

return of equity equation

A

Re=Ra+ D/E(Ra-Rd)

24
Q

Present value of interest rate shield

A

Value of debt* tax rate

25
Q

Value of levered firm

A

VL = Vu + tax*debt value

26
Q

Beta of capital structure with no taxes

A

Ba= (E/E+D)Be + (D/D+E)Bd

27
Q

Beta of capital structure with taxes

A

Ba= (E/E+D(1-T)Be + (D(1-T)/E+D(1-T))Bd

28
Q

Risk on equity of levered firm

A

𝛽𝐸 = 𝛽𝐴 + 𝐷(1−𝑇𝑐)/𝐸 (𝛽𝐴 − 𝛽𝐷)

29
Q
A