Calculations

Question 1

current yield

Answer 1

annual dividend or interest
/
current market price

Question 2

number of shares for conversion

Answer 2

par value
/
conversion price

Question 3

parity

Answer 3

bond market value
/
number of shares

Question 4

tax free equivalent yield

Answer 4

(corporate rate) (100%-tax bracket)

Question 5

tax equivalent yield

Answer 5

municipal rate
/
100% - tax bracket

Question 6

NAV of mutual fund share

Answer 6

fund NAV
/
number of shares outsanding

Question 7

dollar cost average

Answer 7

total dollars invested
/
number of shares purchased

Question 8

average market price

Answer 8

share price total
/
number of investments

Question 9

Stock holders equity

Answer 9

assets - liabilities

Question 10

total return

Answer 10

income (dividends or interest) + gain or loss
/
original investment

Question 11

annualized return

Answer 11

total return on an annualized basis

Question 12

inflation adjusted real return

Answer 12

total return - CPI

Question 13

after tax return

Answer 13

total return - marginal tax bracket

Question 14

rule of 72

Answer 14

72/ interest rate

= number of years to double investment

Question 15

mean

Answer 15

simple average of numbers

Question 16

median

Answer 16

in group of numbers, the one with an equal above and below

Question 17

mode

Answer 17

in a group of numbers, the one appearing most fequently

Question 18

range

Answer 18

in a group of numbers the difference between the highest and the lowest one

Question 19

Alpha

Answer 19

(actual - RF) - (beta [market - RF])

Question 20

Sharpe ratio

Answer 20

actual - RF
/
standard deviation

Question 21

future value

Answer 21

PV x (1+r) ^n

Question 22

Future Value

Question 23

NPV

Answer 23

expressed in $ amounts, not as a rate of return

Question 24

IRR

Answer 24

-always expressed as %
determine by iteration
-long term returns takes into consideration TVM

YTM = IRR

When IRR = discount or required rate then, NPV = 0

Question 25

DCF

Question 26

Geometric mean

Answer 26

multiply all numbers together then take the nth root of them

Question 27

beta

Answer 27

measure the variability between a particular stocks/portfolio movement and that of the market in general, only systematic (market) - beta of 1 is similar to risk of market as whole - measured against S&P 500 - negative beta diversity - aggressive investor = over 1 beta - conservative investor = low positive beta

Question 28

alpha

Answer 28

comparing performance after eliminate risk free rate negative alpha = underperform market positive alpha = over perform market

Question 29

risk free rate

Answer 29

91 day/13 week US treasury bill. have a beta = 0 because price movements are not related to market

Question 30

standard deviation

Answer 30

includes systematic (market) and unsystematic measure of volatility of an investments projected returns, computed by using historical performance data statical term that measure amount of variability or dispersion around an average

Question 31

beta vs standard deviation

Answer 31

beta - volatility measure of a security compared to overall market. measure systematic (market risk) SD - volatility measure of a security compared with its expected performance and includes both systematic and unsystematic risk (total risk).

Question 32

correlation coefficient

Answer 32

number that ranges -1 to +1 for price movements ``` +1 = perfectly correlated 0 = unrelated -1 = perfectly opposite ``` .80 and up are high correlation

Question 33

working capital *liquidity

Answer 33

= current assets - current liabilities increase - issuing securities - profits from operations - sale of non current assets decrease - declaring cash dividend - pay off long term debt - net operation losses

Question 34

quick asset ratio / acid test ratio

Answer 34

current assets - inventory / current liabilities

Question 35

debt to equity ratio

Answer 35

long term debt / total capital

Question 36

book value per share

Answer 36

tangible assets - liabilities - par value of preferred / share of common stock outstanding

Question 37

EPS Earnings per share

Answer 37

earnings available to common / number of shares outstanding

Question 38

EPS after dilution

Answer 38

assumes all convertible securities, warrants, bonds, preferred stock now converted into common more common stock outstanding sharing in earnings, EPS is reduced (diluted).

Question 39

dividend payout ratio

Answer 39

annual dividends per common share / EPS

Question 40

PE - Price to earnings Ratio

Answer 40

current market price of common share / EPS

Question 41

price to book ratio

Answer 41

market price of common stock relative to book value per share - BV is companys theoretical liquidation value expressed on a per share basis - growth companies have higher PE ratios than do cyclical or defensive companies - earnings per share relates only to common stock; it assumes preferred dividends were paid