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What is the formula for discount factors (with regards to interest rate)?
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What is the formula to calculate the real interest rate from the nominal interest rate (or visa versa)?
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What is the formula to find the value of a perpetuity? and what is it with regards to a growing perpetuity?
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How do you find the value of an annuity?
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What is the formula for expected returns with regards to possible returns and probabilities?
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What is the formula for variance (and hence standard deviation) of returns?
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What is the formula for covariance of returns with regards to the returns on two assets?
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How do you calculate the correlation coefficient between the returns from two assets?
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How do you calculate a portfolio's variance?
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What is the formula to calculate the risk contribution of a stock (i) in portfolio (P)?
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Risk Contribution:
The risk contribution of a stock (i) to a portfolio (P) is obtained by summing the corresponding row
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What is the formula to calculate the Beta of a stock with respect to a specific portfolio (P)?
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Write the formula for the expected return on an investment (i) with regards to its market Beta.
(Note: This relates to the Security Market Line)
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What is the formula to calculate the total variance of an investment with regards to its market and specific risk?
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How do you interpret R squared in a regression of stock returns?
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What is the formula for the Weighted Average Cost of Capital (WACC)?
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What is the formula for the tax adjusted WACC?
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| If you are given an interest rate which is compounded semi-annually you are still usually told the "annual" interest rate. This means, you need to take that rate and divide it by 2 to find out the rate used for each semi-annual period. (It is unlikely that he would, but if he gave a monthly compounding problem than you would use 12 instead of 2). BUT, we might be asked what an equivalent annual-compounding interest rate might be if you look at the stock after 1 year. What formula do you need to calculate that? |
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Definition
(1+s/2)^2=r
where "s" is the semi-annual compounding interest rate you were originally given (note, you needed to divide it by 2 in this formula as well to figure out the rate used each period) and where "r" is the equivalent rate than an annual compounding rate would need to have to have the same value after 1 year. (if this is confusing for you, don't worry! Go to Alan's slides from Lecture 1, slide 26, or do the problem sets from that lecture) |
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