IMT Exam 2 Quick Reference: Portfolio Formulas and Cues
Last revised: June 29, 2026
Quick reference for IMT Exam 2 formulas, portfolio constraints, fixed-income cues, valuation methods, performance metrics, and case-reading triggers.
Use this quick reference after you have studied the official material. It is a compact decision aid for Finance Prep practice, not an official CSI formula sheet.
Portfolio and return formulas
Item
Formula
Watch for
Holding-period return
\((P_1 - P_0 + I) / P_0\)
Include income and use beginning value
Geometric return
\(\left[\prod(1+r_t)\right]^{1/n} - 1\)
Compound growth over multiple periods
Real return
\((1 + r) / (1 + inflation) - 1\)
Purchasing power, not nominal dollars
Portfolio return
\(\sum w_i r_i\)
Weights must sum to the portfolio
Expected return
\(\sum p_i r_i\)
Scenario probabilities
CAPM
\(R_f + beta(R_m - R_f)\)
Systematic risk only
Fixed income cues
Concept
Remember
Price and yield
Move in opposite directions
Duration
Higher duration means greater price sensitivity
Convexity
Matters when yield changes are large
Credit spread
Wider spread lowers price if other inputs stay constant
Callable bond
Upside may be capped when rates fall
Immunization
Needs monitoring and rebalancing, not a one-time setup
Ladder
Spreads maturity and reinvestment risk
Barbell
Concentrates short and long maturities
Bullet
Concentrates around a target maturity
Equity and managed-product cues
Tool
Best use
Trap
Dividend discount model
Stable dividend-paying company
Growth cannot be treated casually
P/E ratio
Comparable earnings-based valuation
Low P/E may reflect risk or decline
P/B ratio
Asset-heavy or financial companies
Weak for intangible-heavy businesses
EV/EBITDA
Operating comparison across capital structures
Ignores capital spending and debt service
Active fund
Skill, mandate fit, and inefficiency are plausible