Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key


Play button


Play button




Click to flip

6 Cards in this Set

  • Front
  • Back

The quick ratio or acid-test ratio

(current assets- inventory) /current liabilities.

The Capital Asset Pricing Model (CAPM)

we can determine the expected return of any security (or portfolio)

Er = Rf + B(expected return on the market − Rf)

Er stands for expected return

Rf is the risk-free return

B is beta

The Sharpe ratio is used to measure risk-adjusted performance of either a portfolio or an individual security.

Actual return- Rf (90-day T-bill) / standard deviation

-the higher the Sharpe ratio, the better the portfolio or security has performed on a risk-adjusted basis.


is the extent to which a security’s performance exceeds (or falls short of) what would be expected based on its beta

Any question asking about the risk-adjusted return

is going to be referring to the Sharpe Ratio

internal rate of return (IRR)
1. It is the discount rate that makes the future value of an investment equal to its present value.
2. In order to compute, it is necessary to know the initial cost of the investment.
3. In order to compute, it is necessary to know the cash flow of the investment.
4. It is equivalent to a bond's yield to maturity.