portfolio mngmt

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portfolio mngmt
2012-09-07 18:38:38
portfolio mgmt risk

portfolio mgmt and risk
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  1. risk premium is made up of 4 elements
    • interest rate risk
    • purchasing power risk (inflation)
    • business risk
    • financial risk
  2. risk premium
    expected return minus risk-free return
  3. after tax return=actual return after paying income  taxes
    100%-tax rate, then multiply times the return
  4. 15% is for both dividends and capital gains
  5. dividends always taxed at 15%
  6. real return takes into consideration
    the inflation rate

    real return = total return minus the inflation rate
  7. bond interest rate risk
    bond sold prior to maturity
  8. in regards to interest rate risk, if all bonds are being sold prior to maturity and they show yields--
    pick the bond with the highest yield
  9. reinvestment risk is on all debt security of 20 years or less and will be
    held until maturity

    if based on years, and they do not state if the bond is being held or sold, choose any bond under 20 years.
  10. liquidity is also know as
    marketability risk
  11. true of false, money market vehicles are considered to be the most liquid
  12. what is duration?
    the measurement of the sensitivity of bond prices during changes in interest rates
  13. how to find the duration risk or greatest price movement:
    • -alwasy pick the longest bond
    • two bonds with the saem maturity and which has the greatest price change? pick the lowest coupon
  14. volatility risk is measured by:
    • alpha
    • beta
    • r-squared
    • sharpe ratio
    • delta
    • correlation coefficient
    • standard deviation
  15. sharpe ratio
    compares risk-adjusted return to volatility as compared to standard deviation
  16. large cap
    5 billion or more
  17. market capitalization
    price per share x number of outstanding shares
  18. mid cap
    1 billion - 5 billion
  19. small cap
    250 million - 1 billion
  20. micro cap
    250 million or less
  21. russell 2000
    small cap
  22. wilshire 5000
    all caps
  23. s&p 500
    large cap