Topic 5 - Portfolio allocation Flashcards
A nxxxxxx interest rate is the growth rate of your money.
A rxxx interest rate is the growth rate of your purchasing power.
A nominal interest rate is the growth rate of your money
A real interest rate is the growth rate of your purchasing power
True or False:
We expect higher nominal interest rates when inflation is higher.
TRUE
What are 3 sources of Economic Risk?
True or False:
HPR is Hippopotamus Peripheral Regard?
Nah it aint
When calculating Expected Return, what are the variables used in the equation
How is Standard Deviation calculated?
STD = Square root of….
Variance
Which symbol is Standard Deviation and which is Variation?
σ σ2
σ = Standard Deviation
σ2 = Variation
Yessum
True or False:
Risk premium is the difference between the expected HPR and the risk-free rate??
Yes, Risk Premium = difference between expected HPR and the risk-free rate
Risk-free rate = rate of interest that can be earned with certainty
Difference between actual rate of return and risk-free rate is called exxxxx rexxxx
Excess Return
Difference between actual rate of return and risk-free rate is called excess return
?
What is this?
?
Expected Return
Chat does this happen?
No cap!
What is the Sharpe Ratio?
It evaluates the performance of Invxxxxxxx Manxxxxx
Sharpe ratio
Evaluates performance of investment managers
What does an indifference curve do?
The Indifference curve connects all portfolio points with the same utility value.
Equally preferred portfolios lie in the mean–standard deviation plane on an indifference curve.
True or False:
T-Bills are viewed as THE Risk-Free asset
The geometric mean must be used when working with percentages, which are derived from values, while the standard arithmetic mean works with the values themselves.
This for real?
This true?
Yeah
