# QM 1

rename
lightenning's
version from
2017-02-19 00:34

## Section

Question | Answer |
---|---|

Real Risk-free Rate | Single period return on a risk-free asset assuming zero inflation |

Nominal Risk-free rate | Real risk-free rate+inflation |

Annuity | Final set of level sequential Cash flows |

Ordinary Annuity | annuity with Cash flows happening at the end of the Period |

Perpetuity Formula | PV= PMT / (I/Y) |

Continuous Compounding FV Formula | FVn = PV e ^ (rs x n ) |

EAR formula | EAR = [ ( 1 + Periodic interest rate ) ^ N ] - 1 |

Loan Amortization | Process of retiring loan obligations thru predetermined equal monthly payments which include both principal repayment and interest ( based on the outstanding interest due based on the value of the loan at the beginning of that period ) |

NPV | PV of all expected inflows from the investment minus the PV of all expected outflows. |

IRR | Discount rate that equates the project's NPV to zero |

IRR > required rate of return | Accept |

IRR < Required rate of return | Deny |

Mutually exclusive Project | When only one of many options can be chosen ( NPV and IRR analysis ) |

Problems with IRR | Multiple IRR or no IRR |

Holding Period Yield (HPY) | [(sum of returns - P0)/P0 ] x 100 |

Money-Weighted rate of return | Internal rate of return of an investment. |

Time-weighted Rate of return | Compounded rate of growth of an investment over a stated measurement period |

Time weighted rate of return formula | (1 + time weighted rate of return)^2 = (1+HPY1)((1+HPY2) |

Bank Discount Yield | BDY = ( D/F ) x (360/t) where [D = Face value - Price] and t is remaining days until maturity |

Treasury HPY | HPY = P1 + D1 - P0 / P0 where P1 is face value and P0 is current value |

Effective Annual Yield (EAY) | annualized return measure that accounts for compounding over 365-day period. |

EAY formula | EAY = [( 1+HPY ) ^ (365/t)] -1 where t is number of days remaining |

HPY formula based on EAY | HPY = ([1+EAY)^ t/365 ] -1 |

Money Market Yield | holding period yield annualized on a 360-day basis |

Formula for Rmm | rmm = (360 x r BD ) / (360 - ( t x r BD ) ) = HPY x (360 /t ) |

Bond Equivalent Yield | Semiannual discount rate multiplied by two |

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