Investments

Question 1

Sharpe

Answer 1

Std dev

Remember for Ss. Std deviation

Question 2

Traynor

Answer 2

Beta

Question 3

Alpha

Answer 3

Absolute measure

Alpha cannot compare

Question 4

Risk

Answer 4

Qualitative and quanta five

Question 5

Total risk

Answer 5

Unsystematic and systematic

Measure by std

Question 6

Systematic Risk

Answer 6

Cannot be diversified away
Risk in the system
Beta

Question 7

Bond risks

Answer 7

Interest rate risk
Reinvestment risk
Purchasing power risk

Question 8

Business risk

Answer 8

Single company

Question 9

Financial risk

Answer 9

Leverage. Too much bonds

Question 10

Bond risk

Answer 10

Drip
Default
Reinvestment
Interest rate
Purchasing power risk

Question 11

Std

Answer 11

68
95
99
Positive skew ness is better. Hump to left

Question 12

Leptokurtic

Answer 12

Leap in returns

Question 13

Playkurtic

Answer 13

Plate. Lower peak

Question 14

Std calc

Answer 14

Sum
Gold 7
Gold 8

Question 15

Coefficient of determination

Answer 15

R2. Higher number closer correlation. Looking above .7

Question 16

Dividend discount model

Answer 16

Dividend/required return
What u think stock is worth
1.50dividend/.06. Required return

Question 17

Constant growth dividend model

Answer 17

Intrinsic value

Div/ required return - growth of dividend
D1. One period out
0 means dividend now

Question 18

Dividend growth rate

Answer 18

Growth of dividend = return on equity x retention ratio
Inverse of dividend payout ratio
Sum to one
Ret ratio is .60 payout is .40

Question 19

Required return

Answer 19

Single factor model dependent on beta
Risk free rate + (risk market-risk free rate) x beta

()beta stock risk premium

Question 20

Expected rate of return

Answer 20

Return = div plus 1/price+ growth rate.

Question 21

Bats

Answer 21

Beta rel. r2 70 higher
Alpha
Traynor.
Sharpe if beta not reliable

Question 22

Geometric retune

Answer 22

Takes into account compounding

Question 23

Holding period return

Answer 23

Sold-buy/buy