The Security Market Line, or the SML.
Beta is a measure of the systematic risk of an asset relative to an average asset
representing the market portfolio. In the model we use M, the beta of the market portfolio,
which is set to 1 and f, the beta of the ri
FNCE 370v9: Assignment 1
Assignment 1 is worth 5% of your final mark. Complete and submit Assignment 1 after you
complete Lesson 1.
Save this assignment file and use it to record your responses to all three parts of this
assignment. Answer all three parts
1. What is the percentage of sales approach, what is it used for, and what is the main estimate used
in this approach?
percentage of sales approach
Financial planning method in which accounts are projected depending on a firms predicted sales
Lesson 4: Chapter 6: Discounted Cash Flow Valuation
1. What is a timeline, and how can it be used to figure out the present value and future value of
2. What is the most basic method of calculating the present value of multiple future cash flo
Portfolio Expected Return, Variance, and Standard Deviation
The process for calculating portfolio expected return, variance, and standard
deviation is divided, by me, into 7 steps:
Step 1: Identify the states and the probability associated with each state
Profitability Index calculation.
PI measures the present value of the benefits derived from a project or asset, relative to its
PI = PV of all cash inflows / initial cash outflows
C0 = initial cost
C1, C2, , CN = Future cash flow
1. What does it mean when we take the future value of a cash flow occurring today or at time 0?
2. What is the difference between compound interest and simple interest?
The process of leaving your money and any accumulated interest in an investment for
There are two main types of cash-flows: Cash Outflows, and, Cash Inflows.
A cash outflow is any negative cash-flow, i.e., the company has to pay out (or otherwise, lose) money.
The two main types of cash outflows that we will see in NPV analysis are the i
Internal rate of return (IRR) calculation.
IRR is defined as the discount rate that makes the NPV (Net Present Value, see below) of a
project/asset equal to 0. The general formula used to derive IRR is:
NPV = [CFt / (1 + IRR)t] = 0
NPV = net present
FNCE 370v9: Assignment 2
Assignment 2 is worth 5% of your final mark. Complete and submit Assignment 2 after you
complete Lesson 6.