Formulas Revision Flashcards

1
Q

Variance

(With proba + with historical data)

A
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2
Q

Simple Interest=

A

X(1 + rT)

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3
Q

Future Value

A

X(1 + r)T

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4
Q

Present Value (2)

A

DF * X

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5
Q

Discount Factor

A

PV of $1

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6
Q

Net Present Value

A
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7
Q

PV Perpetuity

A
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8
Q

PVp2 = value of a perpetuity paying C per year with first payment in T+1 years

A
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9
Q

PV of an annuity: (3)

A
  • PVp - PVp2
    *
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10
Q

PV of an annuity paid at the beginingof the year

A

PVa * (1 + r)

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11
Q

PVp with growth

A
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12
Q

PVa with growth

A
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13
Q

Effective Annual Rate

A
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14
Q

Effective Monthly Rate

A
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15
Q

Continuous Compounding

A

Xer

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16
Q

Continuous discounting

A

PV= Xe-rT

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17
Q

Real interest rate

A

(1+r)/(1+pi)

i=real interest rate

r=nominal interest rate

𝜋(pi)=inflation rate

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18
Q

Approximate Yield To Maturity

A
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19
Q

Relationship formula YTM/PV

A
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20
Q

Gordon Growth Formula

A
21
Q

Stock Price with constant dividend

A
22
Q

Return on Equity/Return on investment

A

= Amount of earnings a dollar of equity creates

EPS= earning per share

23
Q

Earning growth

A

Plowback ratio = 1 -payout ratio

24
Q

Nominal Interest rate =

A

Real rate + Inflation

25
Q

Forward Rate

A
26
Q

Standard Deviation

A

Racine carrée of Variance

27
Q

Inflation rate is written as:

A

pi

𝜋

28
Q

Above and Below Par:

A

Above par = coupon rate > YTM

Below par = coupon rate < YTM

29
Q

A zero-coupon bond…

A

Receive money only at maturity

30
Q

PV of growth opportunities:

A

P2 - P1

Form reinvesting VS firm paying out

31
Q

Covariance formula

A
32
Q

Expected Portfolio Return

A

xi = portfolio weight allocated to asset i

yi = mean/expected return on asset i

33
Q

Variance of portfolio

A

ex. with 2 assets

34
Q

Beta asset

A
  • If you slightly increase the portfolio weight on stock i then the overall portfolio variance would increase by an amount proportional to Bi
  • If Beta is 0.4, for every 1% rise (fall) in the market, you expect the stock to rise (fall) by 0.4%
  • B > 1 = Aggressive; moves with the market but with greater amplitude
35
Q

Beta portfolio

A
36
Q

US risk premium

A

Difference between mean annual stock market return and T-Bill return

37
Q

Portfolio weights and risk free asset

A
38
Q

Annual (arithmetic) return

A

(P1 - P0 + D1) / P0

P1 = new price

P0 = ancient price

D1 = dividend

39
Q

Capital Gain =

A

(VA - VD) / VD) * 100

40
Q

Dividend Yield

A
41
Q

Excess Return

A

R - Rf

(annual return - risk-free)

42
Q

Present Value of Growth Opportunities

A

Difference in value between the firm that plows back and the one who does not

43
Q

Modified Duration (or Volatility)

A
44
Q

Yield changes by (delta)y

A
45
Q

Duration/Macaulay Duration

A
46
Q

Risk free asset property

A
  • Rf Variance and Covariance = 0
47
Q

CAPM (Capital Asset Pricing Model)

A
48
Q

Sharpe Ratio

A
49
Q

Correlation

A