investment flashcards
nav
(total value of all securities-liabilities)/number of shares
Price/Book Ratio
closing price/(assets-intangible assets-liabilities)
When is nav calculated for mutual funds?
Everyday at the close of the market. All buy and sell orders are included.
Why are changes in nav not a good gauge of mutual fund performance?
They pay out all capitol gains and income to shareholders.
alpha
Shows how close the returns matched the risk taken to get them
sharpe ratio describes
how much you are being compensated for the risk you are taking
What is CAPM used for?
To identify the required return of an investment.
Jensen Index
alpha
Geometric mean formula
((1+R1)x(1+R2)x(1+Rn))1/n-1
When do you use the geometric mean?
When you want to know the actual return for a given period.
Formula for variance
Summation(xi-Xbar)2/(n-1)
Formula for Stdev
Square root(variance)2
Formula for predicting the future return
t-1/n-1 * Geometric Mean Return + n-t/n-1 * Arithmetic Mean
Formula for margin call price
P*=#Shares/Amount Borrowed/(1-Margin)
Formula for break even point on options
Strike price-option premium
