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

21
Q

Stock Price with constant dividend

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
Forward Rate
26
Standard Deviation
Racine carrée of Variance
27
Inflation rate is written as:
pi 𝜋
28
Above and Below Par:
Above par = coupon rate **\>** YTM Below par = coupon rate **\<** YTM
29
A zero-coupon bond...
Receive money only at maturity
30
PV of growth opportunities:
P2 - P1 Form reinvesting VS firm paying out
31
Covariance formula
32
Expected Portfolio Return
xi = portfolio weight allocated to asset i yi = mean/expected return on asset i
33
Variance of portfolio
ex. with 2 assets
34
Beta asset
* 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
Beta portfolio
36
US risk premium
Difference between mean annual stock market return and T-Bill return
37
Portfolio weights and risk free asset
38
Annual (arithmetic) return
(P1 - P0 + D1) / P0 ## Footnote P1 = new price P0 = ancient price D1 = dividend
39
Capital Gain =
(VA - VD) / VD) \* 100
40
Dividend Yield
41
Excess Return
R - Rf (annual return - risk-free)
42
Present Value of Growth Opportunities
Difference in value between the firm that plows back and the one who does not
43
Modified Duration (or Volatility)
44
Yield changes by (delta)y
45
Duration/Macaulay Duration
46
Risk free asset property
* Rf Variance and Covariance = 0
47
CAPM (Capital Asset Pricing Model)
48
Sharpe Ratio
49
Correlation