Learning Outcome Statements

1. NPV and IRR

a. calculate and interpret the net present value (NPV) and the internal rate of return (IRR) of an investment;

b. contrast the NPV rule to the IRR rule, and identify problems associated with the IRR rule;

2. Holding Period Return

c. calculate and interpret a holding period return (total return);

3. Dollar-weighted and Time-weighted Rates of Return

d. calculate and compare the money-weighted and time-weighted rates of return of a portfolio and evaluate the performance of portfolios based on these measures;

4. Different Yield Measures of a U.S. Treasury Bill

e. calculate and interpret the bank discount yield, holding period yield, effective annual yield, and money market yield for U.S. Treasury bills and other money market instruments;

5. Bond Equivalent Yield

f. convert among holding period yields, money market yields, effective annual yields, and bond equivalent yields.