Commonly Used Notation

b Retention or plowback ratio rf The risk-free rate of interest

C Call option value rM The rate of return on the market
CF Cash flow portfolio

D Duration ROE Return on equity, incremental

economic earnings per dollar
E Exchange rate reinvested in the firm
E(x) Expected value of random variable x Sp Reward-to-volatility ratio of a
F Futures price portfolio, also called Sharpe’s
measure; the excess expected return
e 2.718, the base for the natural
divided by the standard deviation
logarithm, used for continuous
compounding t Time
ei t The firm-specific return, also called Tp Treynor’s measure for a portfolio,
the residual return, of security i in excess expected return divided by
period t beta
f Forward rate of interest V Intrinsic value of a firm, the present
value of future dividends per share
g Growth rate of dividends
X Exercise price of an option
H Hedge ratio for an option,
sometimes called the option’s delta y Yield to maturity
i Inflation rate Rate of return beyond the value that
would be forecast from the market’s
k Market capitalization rate, the
return and the systematic risk of the
required rate of return on a firm’s
security
stock
Systematic or market risk of a
ln Natural logarithm function
security
M The market portfolio
ij Correlation coefficient between
N(d) Cumulative normal function, the returns on securities i and j
probability that a standard normal
Standard deviation
random variable will have value less
2
than d Variance
p Probability Cov(ri , rj) Covariance between returns on
securities i and j
P Put value
PV Present value
P/E Price-to-earnings multiple
r Rate of return on a security; for
fixed-income securities, r may
denote the rate of interest for a
particular period

ISBN: 0073530700 Back endsheets

Author: Zvi Bodie, Alex Kane, Alan J. Marcus Color: 539M (blue) and PMS139 (gold)
Title: Investments, 9/e Page: 1