General

Question 1

DCA (Dollar-cost averaging)

Answer 1

is a simple technique that entails investing a fixed amount of money in the same fund or stock at regular intervals over a long period of time.
This method is suitable for assets with high intrinsic value and, normal for big inventing companies.

Question 2

Covariance and correlation differences

Answer 2

Covariance indicates the direction of the linear relationship between variables while correlation measures both strength and direction of the linear relationship between two variables.

Question 3

Covariance and correlation differences 2

Answer 3

Is the process of studying the cause and effect relationship that exists between two variables.

Question 4

Is covariance better or correlation?

Answer 4

Correlation is preferred over covariance because it remains unaffected by the change in location and scale.

Question 5

Correlation formula

Answer 5

Cov (x, y) / Variance(x) * Variance(y)

Question 6

rate of return

Answer 6

Ending price - beginning price/begging price
or
Ending price + possible dividend - beginning price/beginning price

Question 7

rate of return

Answer 7

P1 - P0/P0
or
P1/P0 -1

Question 8

Logarithmic return

Answer 8

Log Ending p / Beginning p

Question 9

Annual return formula

Answer 9

[(daily return +1) ^365] * 100 - 1

Question 10

Expected return

Answer 10

Act as a proxy for future return

Related to future

Question 11

Historical return

Answer 11

Past behavior of securities (Historical return) gives us a suitable help to the expected future.

Question 12

Historical return & Expected return

Answer 12

(Historical return) (Rate of return) (Expected return)

Past Future

Question 13

Compound interest

Answer 13

Interest increases exponentially, calculate both capital interest and interest of interest.
Suitable for long-term

Question 14

Law of one price

Answer 14

Absence of arbitrage:

an investment that offers the same return must have the same price

Question 15

MM assumptions

Answer 15

1. Market is competitive and efficient
2. absence of taxation
3. Absence of bankruptcy costs

Question 16

Earning per share

Answer 16

Net income / Average outstanding share of the company

Question 17

borrowing decision does not affect

Answer 17

OI
The total market value of securities
ROA

Question 18

Outstanding share

Answer 18

Refer to a company’s stock currently held by all its shareholders.
Multiply the share price by the number of shares outstanding to find a company’s market capitalization.