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MBA 530 - Test 2

  1. Required Rate of Return (bonds)
    rd
    • rd = I 
    • = to coupon rate if bond sells at par
  2. N for Bonds
    Number of Years to matury.  *2 for Semiannual
  3. Dollars of Interest Paid each year
    • INT = PMT
    • Coupon Rate x Par Value 
  4. Discount Bond
    Interest > Coupon Rate & Bond < Par Value
  5. Premium Bond
    Interest < Coupon Rate & Bond > Par Value
  6. Semi Annual Bonds
    • PMT=PMT/2 
    • N=N*2
    • rd = I/2
  7. Current Yield (Bond)
    • Pmt / PV
    • = Total Yield - Capital Gains Yield
    • Bond payout / sale price
  8. Capital Gain Yield (Bond)
    (ParS - ParP) / ParP
  9. Total Rate of Return (Yield) (Bonds)
    [Sum of Payments + (ParS - ParP)] / ParP
  10. YTM (Yield to Maturity) (Bond)
    • Rate of Interest if Held to matury.
    • Enter N, PV, PMT, FV
    • CPT I/Yr 
  11. YTC (Bonds)
    Yield to Call.  When intrest rates go down corporations will call bonds if they can and replace with cheaper ones.

    • Enter N, PV, PMT, FV
    • CPT I/Y 
  12. r* (Bond)
    • Real Risk free rate of interest
    • = rate on short term treasury bond with no inflation
    • int rate on a riskless security assuming no inflation 
  13. rd = ? (bond)
    • r* + IP + DRP + LP + MRP
    • = Rrf + DRP + LP + MRP

    • IP = Inflation Risk Premium
    • DRP = Default "   "
    • LP = Liquidity " "
    • MRP = Market " "
  14. rate of return (stock)
    (amount received - amount invested) / amount invested
  15. Expected Rate of Return (stock)
    • sum of weighted averages
    • wi pi  (amount of stock i in portfolio x price of i) 
  16. Deviation
    Subtract expected rate of return from a possible outcome
  17. Variance - Sigma2
    sum of each deviation x probability
  18. Std Deviation 
    • Square root of variance
    • 1 STD = 68.26%
    • 2 STD = 95.46%
    • 3 STD = 99.74% 
  19. expected porfolio return
    • weighted average of returns in portfolio
    • wi = amt invested in stock i * rhati = expected return of stock i
  20. diversifiable risk
    unique to a firm and can be cancelled out by good things happening to another firm hence eliminated by diversification
  21. market risk
    not eliminated by diversification.  2008 crash for example
  22. relevant risk
    stocks contribution to portfolio risk
  23. beta
    stocks ricks in relation to the market 
  24. MRP
    • market risk premium
    • MRP = RM - RF 
  25. Risk Premium for Stock i
    • RPi = bi(MRP)
    • RPi = bi(RM-RF) 
  26. Required Return (stock)
    • Risk Free Return + Risk Premium
    • = Rf + bi(Rm-Rf)
    • = Rf + bi(MRP) 
  27. Dt
    Dividend at the end of year t
  28. D0
    Most recent dividend  (not given to purchaser)
  29. D1
    Initial dividend (for purchaser)
  30. P0
    • Market price of stock today 
    • = PV of Future Dividends 
  31. PHATt
    expected price at end of each year t
  32. Dividend Yield (Stock)
    Di/P0
  33. Capital Gains Yield (this year, stock)
    Image Upload 2
  34. g (stock)
    growth rate in dividends
  35. rs (stock)
    required rate of return of a stock
  36. rHATs (stock)
    • Expected rate of return of a stock
    • = dividend yield + capital gains yield
  37. rBARs (stock)
    Actual/Realized rate of return (what you actually got)
  38. PHAT0 (stock valuation)
    = Image Upload 4
  39. PHAT0 (stock valuation)
    g = 0 
    D/rs
  40. PHATn (stock)
    PV of non constant dividends + PV of Constant dividends
  41. Dt (stock)
    • Dividend at time t
    • P0(1+g)t
  42. VPS
    Value of Preferred Stock 
    • = PPS/rPS
    • Price of Preferred Stock / return of prevered stock 
  43. RHATPS
    DPS/VPS
  44. ri
    return of stock i 
    • rf + (RM - Rf)b
    • rf + MRP*b
Author
Calbrenar
ID
160604
Card Set
MBA 530 - Test 2
Description
MBA 530 Test 2
Updated

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