# MBA 530 - Test 2

 The flashcards below were created by user Calbrenar on FreezingBlue Flashcards. Required Rate of Return (bonds) rd rd = I = to coupon rate if bond sells at par N for Bonds Number of Years to matury.  *2 for Semiannual Dollars of Interest Paid each year INT = PMTCoupon Rate x Par Value  Discount Bond Interest > Coupon Rate & Bond < Par Value Premium Bond Interest < Coupon Rate & Bond > Par Value Semi Annual Bonds PMT=PMT/2 N=N*2rd = I/2 Current Yield (Bond) Pmt / PV= Total Yield - Capital Gains YieldBond payout / sale price Capital Gain Yield (Bond) (ParS - ParP) / ParP Total Rate of Return (Yield) (Bonds) [Sum of Payments + (ParS - ParP)] / ParP YTM (Yield to Maturity) (Bond) Rate of Interest if Held to matury.Enter N, PV, PMT, FVCPT I/Yr  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  r* (Bond) Real Risk free rate of interest= rate on short term treasury bond with no inflationint rate on a riskless security assuming no inflation  rd = ? (bond) r* + IP + DRP + LP + MRP = Rrf + DRP + LP + MRP IP = Inflation Risk Premium DRP = Default "   " LP = Liquidity " " MRP = Market " " rate of return (stock) (amount received - amount invested) / amount invested Expected Rate of Return (stock) sum of weighted averageswi pi  (amount of stock i in portfolio x price of i)  Deviation Subtract expected rate of return from a possible outcome Variance - Sigma2 sum of each deviation x probability Std Deviation  Square root of variance1 STD = 68.26%2 STD = 95.46%3 STD = 99.74%  expected porfolio return weighted average of returns in portfoliowi = amt invested in stock i * rhati = expected return of stock i diversifiable risk unique to a firm and can be cancelled out by good things happening to another firm hence eliminated by diversification market risk not eliminated by diversification.  2008 crash for example relevant risk stocks contribution to portfolio risk beta stocks ricks in relation to the market  MRP market risk premiumMRP = RM - RF  Risk Premium for Stock i RPi = bi(MRP)RPi = bi(RM-RF)  Required Return (stock) Risk Free Return + Risk Premium= Rf + bi(Rm-Rf)= Rf + bi(MRP)  Dt Dividend at the end of year t D0 Most recent dividend  (not given to purchaser) D1 Initial dividend (for purchaser) P0 Market price of stock today = PV of Future Dividends  PHATt expected price at end of each year t Dividend Yield (Stock) Di/P0 Capital Gains Yield (this year, stock) g (stock) growth rate in dividends rs (stock) required rate of return of a stock rHATs (stock) Expected rate of return of a stock= dividend yield + capital gains yield rBARs (stock) Actual/Realized rate of return (what you actually got) PHAT0 (stock valuation) = PHAT0 (stock valuation) g = 0  D/rs PHATn (stock) PV of non constant dividends + PV of Constant dividends Dt (stock) Dividend at time tP0(1+g)t VPS Value of Preferred Stock  = PPS/rPSPrice of Preferred Stock / return of prevered stock  RHATPS DPS/VPS ri return of stock i  rf + (RM - Rf)brf + MRP*b AuthorCalbrenar ID160604 Card SetMBA 530 - Test 2 DescriptionMBA 530 Test 2 Updated2012-07-12T14:25:30Z Show Answers