Chapter 6: Investment Risk Flashcards
1
Q
What is a nominal return?
A
Unadjusted returns, not accounting inflation
2
Q
What is a real return?
A
Return adjusted for inflation.
3
Q
What is the calculation for real rate of return of return?
A
(1 + nominal RoR) / (1 + inflation rate) = (1 + real RoR)
4
Q
What is a holding period return?
A
Total return on an assert over the holding period including capital gains and income
5
Q
What is growth risk?
A
Risk of equity price moving adversely.
6
Q
What is the Sharpe ratio?
A
(return on the portfolio - risk-free return) / st dev
Essentially risk adjusted return
7
Q
What is the tracking error?
A
St dev relative to its benchmark. Measure how closely it follows the index to which it is benchmarked.
