What do we actually need to know?
StDev*(Ra) = IR/SR(b) * StDev(b)
SRp^2 = SRb^2 + IR^2
Active risk squared = s2(R p – R B)
Portfolio return = IC √BR * σA
Do we need to know the formulas above? What else? Any tips on memorizing them? I’m really lost…Thanks in advance.
TC involved too.
Full fundamental law
E®=TC x IC x √BR * σA
or
IR=TC x IC x √BR
Thank you. What about the ones I mentioned? Are they worth remembering?
It isn’t so much about remembering as understanding the concept that the formula conveys. In that regard they are all important, but I don’t think the formulae are testable as standalone questions. Probably help you analyze a table etc.
I would also add being able to derive/manipulate the formulas - given the inputs to 1 can you solve for one of the other formulas/inputs. That seems to be a big tester on the practice exams.