Questions Flashcards
(21 cards)
PVF for refunding bond decisions
New Int. rate x (1-t)
Calculation of duration?
year, cash flow, P. V., proportion of bond value, proportion of bond value x time Years.
volatility of bonds?
Duration ÷ 1+ yields
Expected market price
If Increase in required yields by- basis points
M.P. - (M.P. x basis points)
Variance formulae
(4)/N OR IF PROBABILITIES THEN MULTIPLIED BY PROBABILITIES
Minimum risk formulae
A%= Var- covar/
Var+ var- 2cov
Beta formulae
Sxy- n xb yb/
SY2- n(yb)2
Sys risk formulae
B2 x Market variance
Characteristics line
alpha + Beta x Rm= Y(bar)
Beta if only 2 values given
R,- R2/
Rm1- Rm2
what is Security line?
Ri= alpha + Beta (Risk Premium)
Covariance between 2 Stocks
B1 × B2 x variance of market return
Treynor ratio
Return actual- Risk free rate/
Beta
Risk free rate for 7% trading at 140
Rf= coupon rate/ market price
The decision regarding change of composition may be taken by
Comparing divided yield b expected return
For return dividend yield × by
Market value
We show how well the Fund will be compensated for the risk undertaken due to
inclusion of stocks of Economy A in the portfolio by
Sharpe or any ratio
How to allocate
the between security B and C to ensure that portfolio is on minimum
variance set?
use of concept of critical line
i.e. WA= a + b.WB (If weight of A is known)
Portfolio variance using Sharpe Index Model:
Systematic variance + unSystematic Variance
( Unsysvariance . Weight Sq.)
formula for no.of futures to be traded if value of B is to be reduced
No. of futures= Portfolio (B-B)/
value of futures
Calculation of wacc
Cost of Equity x equity% + cost of debt (1-t) debt%
