Unit 22

Question 1

Total Return

Answer 1

Dividends/interest + capital appreciation

Question 2

Calculation for mutual fund returns

Answer 2

annual dividend ÷ public offering price (POP) = current yield

Question 3

Difference between annualized return and holding period return

Answer 3

HPR can be over any duration of time

Question 4

Annualization factor

Answer 4

of months in a year / # of months investment is held

Question 5

Real return formula

Answer 5

Total return - CPI inflation percentage

Question 6

Inflation AND taxes reduce returns for which type of investor

Answer 6

Fixed-income investors

Question 7

What are always equal on a TIPS bond because of built-in inflation adjustment

Answer 7

Real rate of return = Coupon rate

Question 8

What risk-adjusted return is calculated using

Answer 8

Sharpe ratio

Question 9

Sharpe ratio calculation

Answer 9

(Actual return - Risk-free rate) / Standard deviation

Question 10

Three points to remember about IRR

Answer 10

1. Preferred method of measuring return on a DPP
2. Takes into consideration the time value of money
3. Way yield to maturity on a bond is computed

Question 11

Does time or dollar-weighted return affect IRR?

Answer 11

Dollar-weighted

Question 12

How most funds on mutual funds are weighted

Answer 12

Time-weighted, no control over whether clients put money in

Question 13

How Dow Jones is different from other benchmarks

Answer 13

Price-weighted instead of cap-weighted

Question 14

How many companies listed in the Nasdaq

Answer 14

3000

Question 15

What MSCI EAFE tracks

Answer 15

Foreign stocks

Question 16

Index that reflects the broadest coverage of the U.S. stock market

Answer 16

Wilshire 5000

Question 17

What index benchmarks small-caps

Answer 17

Russell 2000