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EFB210 Finance 1 > Portfolio Theory > Flashcards

Flashcards in Portfolio Theory Deck (6)
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1
Q

How can we measure risk and return?

A

VAR equation is for risk, E(R) equation is for return

2
Q

What is a portfolio and when is it created?

A

It is created when an investor combines 2 or more assets

3
Q

How do you calculate portfolio returns?

A

Using the Rp,t=Sum of Wi,Ri,t

Where Wi is the proportion of wealth invested in asset i

4
Q

How do you calculate portfolio expected returns?

A

Using the E(Rp)=sum of WiE(Ri)

5
Q

How do you calculate portfolio return variance?

A

Using the VAR(Rp) equation

6
Q

What is the risk of a portfolio?

A

Depends on the individual risk (variance) of each asset and the way they interact (COV or CORREL)