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9 Cards in this Set
- Front
- Back
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What is the relationship between real and nominal interest rates?
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1 + r = (1 + Rn)/(1+i)
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What is the effective annual rate (EAR)?
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percentage increase in funds invested over a 1-year horizon
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What is the annual percentage rates (APRs)?
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rates on short-term investment (less than 1 year) are annualized using simple rather than compound interest
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What is the holding-period return?
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HPR = (ending price of a share - beginning price + cash dividend)/beginning price
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What is excess return?
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difference between the actual rate of return on a risky asset and the risk-free rate
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What is the Sharpe Ratio?
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reward to volatility ratio; risk premium (excess return)/SD of excess return;
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What is Value at Risk (VaR)?
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risk measure that highlights the potential loss from extreme negative returns; i.e. there's a 95% chance that the portfolio will not decline by $4 million
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What is Conditional Tail Expectation (CTE)?
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expected value of portfolio assuming terminal value falls in the bottom 5% of possible outcomes; provides a fuller sense of potential losses from low-probability events
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What is Lower Partial Standard Deviation (LPSD)?
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for non-normal distributions it is a measure of the standard deviation computed solely from values below the expected return; measure of downside risk
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