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Module 3 Formula Sheet

The document outlines various financial concepts related to investment returns, including effective annual rate, money-weighted and time-weighted rates of return, and methods for calculating risk and expected return. It also discusses portfolio management techniques such as covariance, correlation, and beta. Key formulas for calculating variance, standard deviation, and portfolio risk are provided.

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simar nayyar
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18 views40 pages

Module 3 Formula Sheet

The document outlines various financial concepts related to investment returns, including effective annual rate, money-weighted and time-weighted rates of return, and methods for calculating risk and expected return. It also discusses portfolio management techniques such as covariance, correlation, and beta. Key formulas for calculating variance, standard deviation, and portfolio risk are provided.

Uploaded by

simar nayyar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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f1

F2
F3 Average Return X

F4
F5 Effective annual Rate,
Effective annual Rate, If per

EAR=((1+Periodic intere

F6 Money weighted rate of return = Inter


(note: don’t use IRR or MIRR foyrmulas in excel , IR

F7 Time weighted rate of return


F8 Risk (for sample)

Risk= STDEV(actual return)


Risk= STDEV.S(actual return)

F9 Risk (For population)


Risk= STDEV.P(actual return)
(when computing risk for Population)

F10 Expected return (If probabil


F11 Expected Risk (if probability given)

σ = √[ ∑ (Pi*R
F12 Variance = σ ^2
F13 Coefficient of variation
F14 Portfolio Return

F15 Portfolio Risk


Method 1: Standard deviation of various poss
Method2:

Method 3:

F16 Covariance

Cov (X,Y) = ∑(Pi * RX*RY) - ∑(P


Cov(rD , rE ) rDE D E

F17 Correlation formula


F18 Weight of debt and equity or stock 1 and s
F19 Risk and Return of 3 stock portfolio

F20 Portfolio Beta=Systematic Risk


Beta= Slope(Return of Portfolio, Return of
ual Rate, If Annual nominal rate of interest
ate, If periodic nominal rate of interest (half yearly, qu

odic interest)^(number of periods in a year))-1

urn = Internal rate of return=XIRR(cash flow row, date row


as in excel , IRR excel function assumes even period)
probabilty is given)
ity given)

Pi*R i ) – R ]
2 2
rious possible portfolio returns
= Sqrt((Wx)^2*(SD

= Sqrt((Wx)^2*(SD

RY) - ∑(Pi*RX) ∑(Pi*RY)


= Correlation(D, E)*S.D (D)*S.D(E)

=
tock 1 and stock 2 in the portfolio
lio, Return of Market) Excel function
effective annual rate formula

f interest is given,
alf yearly, quyarterly, 25 years interste) is given,

row, date row) (excel method)

(Corporate Finance method)


((Wx)^2*(SDx)^2+(Wy)^2*(Sdy)^2+2*(Wx)*(Wy)*(Sdx)*(S

((Wx)^2*(SDx)^2+(Wy)^2*(Sdy)^2+2*(Wx)*(Wy)*Covarian
Wy)*(Sdx)*(Sdy)*correaltion(x,y))

Wy)*Covariance(x,y))

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