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FRM Unit 1 Formulas Exam Study Guide
100% Verified.
Used to calculate the performance of a security - Answer✔CAPM
Rf + B (Rm - Rf)
Positive Alpha means that the portfolio has outperformed the market - Answer✔Jensen's Alpha
E(Rp) - [Rf + B (Rm - Rf)
Expected return of a portfolio on the efficient frontier uses beta of the MARKET -
Answer✔Capital Market Line
Fr + (Θp / Θm) (Rm - Rf)
Expected return of a portfolio uses the beta of the asset - Answer✔Capital Allocation Line
Rf + (Θp /Θi) (Rm - Rf)
measures the performance of a portfolio. Higher the number the better the portfolio -
Answer✔Share Ratio
SP = (E(Rp) - Rf) / Θp
measures the excess return of a portfolio for each unit of risk. It is forward looking in nature -
Answer✔Treyner Ratio
TR = (E(Rp) - Rf) / (Bp)
1|P a g e
FRM Unit 1 Formulas Exam Study Guide
100% Verified.
Used to calculate the performance of a security - Answer✔CAPM
Rf + B (Rm - Rf)
Positive Alpha means that the portfolio has outperformed the market - Answer✔Jensen's Alpha
E(Rp) - [Rf + B (Rm - Rf)
Expected return of a portfolio on the efficient frontier uses beta of the MARKET -
Answer✔Capital Market Line
Fr + (Θp / Θm) (Rm - Rf)
Expected return of a portfolio uses the beta of the asset - Answer✔Capital Allocation Line
Rf + (Θp /Θi) (Rm - Rf)
measures the performance of a portfolio. Higher the number the better the portfolio -
Answer✔Share Ratio
SP = (E(Rp) - Rf) / Θp
measures the excess return of a portfolio for each unit of risk. It is forward looking in nature -
Answer✔Treyner Ratio
TR = (E(Rp) - Rf) / (Bp)
1|P a g e
