Performance Measures

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Terms in this set (...)

Current Yield
In the case of a debt security, the annual interest is always fixed as a percentage of the par value and doesn't fluctuate when the market price of the security changes.
Yield to maturity
This would only apply to debt securities because they have a loan principal that is to be paid back at some future date.
True yield.
This is a bond's IRR.
Expected Return
The estimate of probable returns an investment may yield
Holding period return
This is the total return over a specified period.
This is not an annualized return.
It is the percentage return over a defined period.
Real rate of return
Returns that have been adjusted for inflation.
To determine the inflation-adjusted rate of return of a debt security, reduce its nominal return by the inflation rate as reflected in the consumer price index.
To determine the inflation-adjusted rate of return of an equity security, reduce the total return by the inflation rate as reflected in the consumer price index.
Internal rate of return (IRR)
This is the preferred method of measuring the return on DPP.
This takes into consideration the time value of money.
This is the way the yield to maturity of a bond is computed.
Time-weighted Returns
Generally of more use than dollar-weighted returns to evaluate portfolio manager performance
Dollar-weighted Returns
Generally of more use than time-weighted returns to evaluate individual investor performance
Benchmark portfolios
Large Cap - S&P 500
Mid Cap - S&P 400
Small Cap - Russell 2000
International stocks - EAFE
Dow Jones Industrial Average
Only major benchmark that is priced weighted.