Investments Formulas Flashcards
Sharpe Ratio
Reward-to-volatility ratio; ratio of portfolio excess return to standard deviation.
![](https://s3.amazonaws.com/brainscape-prod/system/cm/348/745/449/a_image_thumb.jpg?1623678265)
BETA
Risk as a measure of volatility relative to that of the market.
- Standard Deviation
- Diversified
- Systematic Risk
![](https://s3.amazonaws.com/brainscape-prod/system/cm/348/745/614/a_image_thumb.jpg?1623679326)
Covariance
Measures how one security behaves as a direct result of another.
![](https://s3.amazonaws.com/brainscape-prod/system/cm/348/746/004/a_image_thumb.png?1623679399)
Correlation
A measure of the relationship between two variables
Intrinsic value formula
Change in Bond Price
Information Ratio
Portfolio returns above the returns of a benchmark to the volatility of those returns. Managers ability to generate excess returns to a benchmark.
High Ratio means a manager can achieve higher returns more efficiently.
expected return on a portfolio
Capital Asset Pricing Model (CAPM)
Used to determine a theoretically appropriate required rate of return of an asset
Jenson’s alpha
Measures the performances of a portfolio manager to the market
Treynor Ratio
A measure of risk-adjusted performance that relates a portfolio’s excess returns to the portfolio’s beta.
Taxable Equivalent Yield (TEY)
Tax-Exempt Yield / (1 - Marginal Tax Rate)
Dividend payout ratio
Dividends per share / Earnings per share
Stock Yield
Dividend per share / Stock price per share
Margin Call Formula Shortcut
2/3 x Purchase price
Then look for next highest number.