Formula Sheet

Bank Discount Rate (T-bill quotes)

rBD = [(10,000-P)/10000] x (360/n)

rBEY = [(10,000-P)/P] x (365/n)

rEAY = [1+ (10,000-P)/P](365/n) - 1

Scenarios Analysis: Variance = Σ(ri – expected return)2 x pi

Buy on margin:

• Equity: Position value (market value) – Borrowing + Additional cash

• Your margin position: equity/position value
• Margin call when: Market value ≤ Borrowed / (1-MMR)

Short Sales:

• Equity = Total margin account – Market value

• Margin call when: Market value  Total margin account / (1 + MMR)

VaR of 5% = E(ri)+ (-1.64485) σ

A= [E(rQ) – rf ]/σ2Q

Sharpe ratio: [E(rp) – rf ]/σp

Covariance = ρs,BσsσB