6 Questions
What is the sum of a real risk-free rate and premiums that compensate investors for bearing distinct types of risk known as?
Nominal interest rate
Which of the following best describes the relationship between interest rates and required rates of return?
Interest rates can be interpreted as required rates of return
What is the importance of the cash flow additivity principle in finance?
It is important for the no-arbitrage condition and calculating implied forward interest rates
What is the formula for calculating continuously compounded returns?
$e^{rT}$
How would you calculate the time-weighted rate of return for a portfolio?
By linking together sub-period returns geometrically
What does the present value (PV) represent in finance?
The current value of future cash flows discounted at a certain rate
This quiz outlines the learning outcomes for interpreting interest rates and calculating different approaches to return measurement over time.
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