Exam 3 Study Guide Checklist - Study Guide for Exam 3...

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Study Guide for Exam 3 – Covering Chapter 7 (Risk & Return) & Chapter 10 (NPV/IRR/Payback) Chapter 7 – Risk & Return: Quantitative oGiven Returns w/associated probabilities Calculate expected return (see formula sheet) Calculate variance (see formula sheet) Calculate standard deviation (see formula sheet) oConvert coefficient of correlation to covariance & vice-versa (see formula sheet) oCalculate and apply coefficient of variation (see formula sheet) oCalculate and apply Sharpe ratio (see formula sheet) oCalculate portfolio returns – given returns & portfolio weights (no formula given) oCalculate portfolio variance & std. deviation – given weights, individual standard deviations, and covariance (or correlation) – (see formula sheet) oCAPM formula (see formula sheet) Understand and apply the difference between risk premium (of the individual stock or whole market) and the return (of the individual stock or the whole market) Given 3 variables – solve for the missing variable

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