ACC 308 Lecture Notes - Lecture 8: Weighted Arithmetic Mean, Ask Price, Sharpe Ratio
Document Summary
Bank discount rate (t-bills): rbd= (,000-p/,000) * (360/n) Apr = per-period return * periods per year. Risk premium: expected return in excess of that on risk-free securities. Price of risk: rate of return of risk premium to variance. Excess return: rate of return in excess of risk-free rate. Sharpe ratio: (cid:1844)(cid:1842) = (cid:1831)((cid:1870)(cid:1872) ) (cid:1870)(cid:1858) (cid:1870)(cid:1872) (cid:1870)f (cid:1827) = (cid:1831)((cid:1870)(cid:1843)) (cid:1870)(cid:1858) / q (cid:1845) = (cid:1831)((cid:1870)(cid:1842) ) (cid:1870)(cid:1858) / p. 1 + (cid:1870) = (1 + (cid:1844))/(1 + ) (cid:1844) = (cid:1870) + (cid:1831)() = [(cid:1831)((cid:1870)(cid:1842) ) (cid:1870)(cid:1858)] / (cid:1827)p (cid:1829)(cid:1867)(cid:1874)((cid:1870)(cid:1845) , (cid:1870)(cid:1828)) = (cid:1868)()[(cid:1870)(cid:1845) () (cid:1831)((cid:1870)(cid:1845) )][(cid:1870)(cid:1828)() (cid:1831)((cid:1870)(cid:1828))] (cid:1845)(cid:1828) = (cid:1829)(cid:1867)(cid:1874)((cid:1870)(cid:1845) , (cid:1870)(cid:1828)) / (cid:1845)b (cid:1870)(cid:1842) = (cid:1875)(cid:1828)(cid:1870)(cid:1828) + (cid:1875)(cid:1845)(cid:1870)s (cid:1831)((cid:1870)(cid:1842) ) = (cid:1875)(cid:1828)(cid:1831)((cid:1870)(cid:1828)) + (cid:1875)(cid:1845)(cid:1831)((cid:1870)(cid:1845) ) Rule 1 (rate of return): weighted average of returns on components, with portfolio weights as weights: Rule 2 (expected rate of return): weighted average of expected returns on components using portfolio weights:
