Provided Formulas Flashcards
(21 cards)
Constant Growth Dividend Discount Model
Used to determine the intrinsic value of a stock when dividends are growing at constant rate.
Expected Return form of Dividend Discount Model
We can also determine what the expected return of the stock should be if we know the constant rate of the stocks Dividend.
Covariance
Measures the extent to which two variables (they return on investment assets) move together either positively (together) or negatively (opposite)
Standard deviation of a two asset portfolio
Beta coefficient of sample asset
Population standard deviation of a single asset
Population standard deviation of a single asset
Sample standard deviation of a single asset
Also known as a variance, is an absolute measure of the variability of the actual investment returns around the average or mean of those returns otherwise known as the expected return of the investment
Capital asset pricing model
Allows the investor to determine an assets expected rate of return , a form of risk adjusted return encapsulating, how much risk the investors should assume to obtain a particular return from an investment
Tax equivalent yield
Sharp Ration: uses the standard deviation in its denominator and, therefore, maybe used to compare the performance of all portfolios
Jensen’s Alpha: is a measure of the risk adjusted value added by a portfolio manager
Treynor Ratio: uses beta in its denominator, therefore, maybe used only to compare the performance of diversified portfolios or stocks that constitute diversified portfolios
Is a relative measure of performance
The Effective Annual Rate: is the annual percentage rate taking into consideration the impact of compounding. Calculation provides the annual rate of interest of an investment or debt when compounding occurs more than once per year.
Macaulay Duration / Duration
Measures duration of a Bond
Arithmetic mean: is a non-compounded return, is calculated by dividing the sum of the periodic returns by the total number of periods being evaluated.
Estimated Change in a price of a bond:
Unbiased Expectation Theory: states that long-term rates consist of many short term rates, and that long-term rates will be the average of short term rates
Information Ratio: measures the portfolios, average rate of return in excess of a comparison (benchmark) portfolio divided by the standard deviation of the excess return
Geometric Mean: assumes compounding of returns
Holding Period Returns: simply the total return of an investment for the given period over which the investment is owned
