holding period return - CORRECT ANSWER✔✔- (ending value-beginning value) /
beginning value OR
,(Ending value / beginning value) - 1
time-weighted rate of return - CORRECT ANSWER✔✔- The compound rate of growth of
one unit of currency invested in a portfolio during a stated measurement period; a measure of
investment performance that is not sensitive to the timing and amount of withdrawals or
additions to the portfolio. Also a geometric mean return
money weighted return - CORRECT ANSWER✔✔- IRR based on cash inflows and outflows
Bank discount yield - CORRECT ANSWER✔✔- RBD = D/F * 360/t Where: D = dollar
discount from face value, F = face value, T = days until maturity, 360 = days in a year
US T-Bills are quoted on a bank discount basis
holding period yield - CORRECT ANSWER✔✔- Holding Period Return = (ending
value/beginning value) - 1
EAY^t/365 - 1
total return an investor earns between the purchase date and the sale or maturity date
effective annual yield - CORRECT ANSWER✔✔- EAY = (1 + HPY)^365/t - 1 where t is
days to maturity. Remember that EAY > bank discount yield, for three reasons: (a) yield is
based on purchase price, not face value, (b) it is annualized with compound interest (interest
on interest), not simple interest, and (c) it is based on a 365-day year rather than 360 days. Be
prepared to compare these two measures of yield and use these three reasons to explain why
EAY is preferable.
, Descriptive statistics - CORRECT ANSWER✔✔- used to summarize the important
characteristics of large data sets
Inferential statistics - CORRECT ANSWER✔✔- a sample, pertain to the procedures used to
make forecasts, estimates or judgement about a large set of data
nominal scale / categorical - CORRECT ANSWER✔✔- level of measurement with least
information, observations are classified or counted with no particular order
ordinal scale - CORRECT ANSWER✔✔- level of measurement, categorized with respect to
specified characteristic
interval scale - CORRECT ANSWER✔✔- provides relative ranking like ordinal scale plus
assurance that the difference between the scale values are equal e.g. temperature
however measurement of 0 does not necessarily indicate the total absence of what we are
measuring - e.g. 30 c is not three times as hot as 10 c
ratio scale - CORRECT ANSWER✔✔- ratio scales provide ranking and equal difference
between scale values and a true zero point as the origin e.g. measurement of money
difference between parameter and sample statistic - CORRECT ANSWER✔✔- parameter is
used for population
sample statistic is used for sample
modal interval - CORRECT ANSWER✔✔- For any frequency distribution, the interval with
the greatest frequency
relative frequency - CORRECT ANSWER✔✔- dividing the absolute frequency of reach
return by the total number of observations
mode - CORRECT ANSWER✔✔- the value that occurs most frequently in a data set
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