Topic 1 Flashcards
1
Q
Alpha formula
A
expected return - required return given risk
2
Q
Expected return formula
A
Rf + B (Mi - Rf)
3
Q
Sharpe ratio formula
A
Forecast return - Rf / SD
4
Q
Bakers Fund formula
A
100% - R (correlation coefficient) squared
5
Q
What is the R in the Bakers fund formula?
A
correlation coefficient
6
Q
Value of stock (dividend growth model) formula
A
D1 / (Required rate of return (risk free + risk premium) - g)
7
Q
Variance of returns
A
Beta sqaured x SD squared + expected SD ^2
8
Q
Price
A
Price = Dividend/Discount rate (ER)
9
Q
How else to calculate ER (manipulate formula to find price)
A
D1 + P1 - Po / Po
10
Q
Correlation
A
Beta x SD market / SD stock
11
Q
Covariance
A
Beta x beta x SD squared
