BFC2340 Study Guide - Final Guide: Investment, Yield Curve, Yield Spread

• School: Monash University
• Department: Business - BFC
• Course: BFC2340
• Professor: Philip Gharghori

Document Summary

Starting point for measuring a manager"s performance is measuring return. Because there are so many methods available, it is difficult to compare managerial performance. The dollar return of any portfolio is the sum of. The difference b/w market value at the end and beginning of the evaluation period. Rp=portfolio"s return, mv1=market value at end, mv0=market value at beginning, d=cash distributions. A cash inflows from interest are reinvested. Distributions occur at the end of the evaluation period. The client doesn"t pay cash into the portfolio. The longer the evaluation period, the more likely these assumptions will be violated. We can split the long period into short periods (sub-periods) and calculate their average. The return of one sub-period is called the sub-period return. Calculating the average of the sub-period returns: arithmetic average rate of return. An unweighted average of all the sub-periods" returns.