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PM Chp 5
Chp 5
| Question | Answer |
|---|---|
| In the definition of HPR (holding period return) when is the dividend paid? | at then end of the holding period. |
| dividend yield | the percentage return from dividends |
| Can you determine the HPR for a bond? | yes, this is done the same way as for a stock except you would use the coupon payments for the bond in place of dividends. |
| arithmetic average | the sum of the returns in each period divided by the number of periods. |
| what is the best forecast of performance in future quarters? | arithmetic average |
| geometric average | the single per-period return that gives the same cumulative performance as the sequence of actual returns. (also called time-weighted average) |
| What is the best forecast when we want to ignore money under management? | geometric avg or the time weighted average |
| investor net cash flows | dollar amount the investor put into a mutual fund in a given period |
| IRR | internal rate of return, is the interest rate that sets the PV of the cash flows realized on the portfolio = to the cost of establishing the portfolio. |
| true or false, portfolio returns are higher when less money is under management. | true |
| dollar weighted return | the internal rate of return on an investment. |
| APR | Annual percentage rates. |
| EAR | effective annual rate |
| scenario analysis | process of devising a list of possible economic scenarios and specifying the likelihood of each one, as well as the HPR that will be realized in each case. |
| probability distribution | list of possible outcomes with associated probabilities. |
| expected return | the mean (or average) value of the distribution of HPR. This is the reward from the investment |
| mean return | also called the expected return |
| Surprise return | the difference between the actual return and the expected return. |
| variance | the expected value of the squared deviation from the mean. |
| standard deviation | the square root of the variance, this is to give the measure of risk the same dimension as expected return (%) |
| well known bell shaped curve | represents the distribution of returns that are approximately normal. |
| reward | the difference between the expected HPR and the index stock fund and the risk free rate (ex. rf rate = 6%, expected fund rtn 14%, then reward or risk premium = 8%.) |
| risk free rate | the rate you can earn by leaving money in risk-free assets like t-bills, money mkt, or the bank |
| excess return | rate of return in excess of the treasury bill rate |
| risk aversion | reluctance to accept risk |
| what distinguishes gambling from speculation? | risk premium |
| speculating | investors who are willing to take on risk because they expect to earn a risk premium |
| t or f he more risk averse an investor is the greater the risk premium will be | true |
Created by:
delorya
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