Measurement of Investment Return
KNOWLEDGE EXPECTED OF: QAFP® Professionals
Highest Knowledge Level: Understanding
Knowledge Levels and Associated Verbs
Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
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Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
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Application
Ability to put information to use / to use knowledge for relevant, practical purposes
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Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
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Define
To state exactly the meaning of
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Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
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Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
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Determine
To ascertain / to come to a decision, such as by investigation or reasoning
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Compare
To note the similarities and differences between two or more things
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Estimate
To determine an approximate value for
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Calculate
To find the value using mathematics
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Convert
To change from one form or purpose to another
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Evaluate
To reach a conclusion or make a through careful study
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Interpret
To give the meaning of / to construe or understand / to translate orally
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Hold cursor over or click on each term to read its definition.
- Define investment return.
- Define variables that impact the calculation of investment return.
- Amount invested / Face value of investment
- Contributions
- Withdrawals
- Costs and fees
- Investment income received
- Capital gain / loss
- Compounding period
- Compounding frequency
- Exchange rate
- Explain how each variable used in the calculation of investment return affects investment return.
- Define types of investment returns, such as:
- Nominal
- Real
- Effective annual return
- Expected
- Realized
- After-tax
- Real, after-tax
- Risk-free
- Holding period
- Geometric
- Arithmetic
- Dollar-weighted
- Time-weighted
- Explain each type of investment return.
- Identify that past performance for any investment is not indicative of future performance.
KNOWLEDGE EXPECTED OF: CFP® Professionals
Highest Knowledge Level: Evaluation
Knowledge Levels and Associated Verbs
Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
|
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
|
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
|
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
|
||||||
---|---|---|---|---|---|---|---|---|---|
Define
To state exactly the meaning of
|
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
|
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
|
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
|
Compare
To note the similarities and differences between two or more things
|
Estimate
To determine an approximate value for
|
Calculate
To find the value using mathematics
|
Convert
To change from one form or purpose to another
|
Evaluate
To reach a conclusion or make a through careful study
|
Interpret
To give the meaning of / to construe or understand / to translate orally
|
Hold cursor over or click on each term to read its definition.
- Define investment return.
- Define variables that impact the calculation of investment return.
- Amount invested / Face value of investment
- Contributions
- Withdrawals
- Costs and fees
- Investment income received
- Capital gain / loss
- Compounding period
- Compounding frequency
- Exchange rate
- Explain how each variable used in the calculation of investment return affects investment return.
- Define types of investment returns, such as:
- Nominal
- Real
- Effective annual return
- Expected
- Realized
- After-tax
- Real, after-tax
- Risk-free
- Holding period
- Geometric
- Arithmetic
- Dollar-weighted
- Time-weighted
- Explain each type of investment return.
- Identify that past performance for any investment is not indicative of future performance.
Additional Knowledge Expected of CFP Professionals
- Compare types of investment returns, such as:
- Nominal return versus real return
- Expected return versus realized return
- Geometric return versus arithmetic return
- Dollar-weighted return versus time-weighted return
- Interpret the return calculated for an investment.