Formulas & Calcs

Question 1

Current Yield

Answer 1

(For stock: dividend/price)

Question 2

Property Intrinsic Value

Answer 2

Question 3

Intrinsic Value of a Call

Answer 3

Market Price - Exercise Price

(COME*)

Question 4

Intrinsic Value of a Put

Answer 4

Exercise Price - Market Price

(POEM*)

Question 5

Tax EXEMPT Yield
(Tax EQUIVALENT Yield is on form. sheet)

Answer 5

(Taxable yield) x (1-tax rate)

Question 6

Return on Equity

Answer 6

Question 7

Dividend Payout Ratio

Answer 7

Question 8

Margin Call

Answer 8

Question 9

P/E Ratio

Answer 9

Question 10

Convertible Bond Conversion Value

Answer 10

Question 11

Bond Intrinsic Value

Answer 11

• end mode & 2P/YR*
  FV: $1,000
  PMT: coupon divided by 2
  N: years to maturity times P/YR
  I/YR: comparable debt yields
  PV ?

Question 12

Callable Bond Intrinsic Value

Answer 12

end mode & 2 P/YR
FV: callable amount
PMT: half of coupon
N: gold, PY/R years to call option
PV: current price
I/YR: ?

Question 13

Covariance vs. Correlation Coefficient

Answer 13

COV: infinite number of outcomes
Correlation C: +1 to -1 (+1 means perfectly correlated and max risk, -1 exact opposite movement of each other and no risk- SD=0 so unlikely)

Question 14

Coefficient of Variation “relative variability” “which is more risky?”

Answer 14

“Risk per unit of expected return”
Use sigmas on calc shown below then
(SD) / (mean)
(Higher number is riskier)

Question 15

Beta

Answer 15

Question 16

Risk Adjusted Return using Beta

Answer 16

Annual return/Beta
(Choose highest #)

Question 17

Real (inflation adjusted) return

Answer 17

(1+ return)/(1+ inflation)= x
(X - 1)= y
(y x 100)= answer

Question 18

Geometric mean

Answer 18

(Time weighted return)
(PM performance)
1) add 1 to all percentages
2) multiply answers from step 1

FV: answer from step 2
PV: -1
N: number of years
I/YR: ?

Question 19

Internal Rate of Return

Answer 19

PV of cash flow

Enter in cash flows using CFj on calc
Gold, IRR/YR

For NPV
Input the rate of return as I/YR
Gold, NPV

Question 20

Holding Period Return

Answer 20

Question 21

Interest rates are expected to rise

Answer 21

Shorten duration (buy short term)

Question 22

Interest rates are expected to fall

Answer 22

Lengthen duration (buy long maturities)

Question 23

Dividend Growth Model “what is the estimated price if the stocks dividends were to grow by…”

Answer 23

Question 24

Expected Return “would you suggest your client purchase the stock if it’s dividend is expected to increase by…”

Answer 24

Question 25

Stock risk premium vs Market risk premium

Answer 25

Question 26

Required rate of return (CAPM)

Answer 26

SML (return required by investors before they will commit to an investment)

Question 27

Stock split total new stock share amount

Answer 27

X:Y split and Z number of shares X/Y times Z = New total number of shares

Question 28

New par value after stock split

Answer 28

X:Y stock split with OG value of $Z Y/X times Z = New per share value

Question 29

Dollar amount of margin call

Answer 29

1) maintenance margin% x new dollar value of portfolio since price drop= equity required 2) new dollar value of portfolio since price drop - initial margin requirement = actual equity 3) equity req - actual equity = maintenance call amount

Question 30

Mortgage payment calc

Answer 30

* end mode & 12P/YR* PV: Mortgage loan amount/balance FV: 0 I/YR: interest rate N: years gold P/YR PMT: ?

Question 31

College education calc

Answer 31

1) inflate 1st year value for inflation PV: amt in todays dollars N: years until first year of college I/YR: inflation rate FV: ? 2) college years using real rate of return * BEGIN MODE * PMT : (-) answer from step 1 N: 4 I/YR: real rate of return PV: ? 3) payment now or per year (can be begin or end mode - pay attention) FV: answer from step 2 N: years until first year of college I/YR: regular return PMT: ? Or PV: ? (Lump sum)

Question 32

Change in price or change in rate (duration given)

Answer 32

Question 33

Net after tax mortgage payment for the first year

Answer 33

1) calculate monthly mortgage pmt 2) multiply 1) by 12 3) round down to estimate the interest paid 4) multiply 3) by tax bracket % 5) subtract 4) from answer 2)

Question 34

Dollar amount of a refinanced loan

Answer 34

1) calculate monthly pmt 2) enter below **12 gold p/yr END mode** N: gold, years in mortgage I/YR: mortgage interest rate PV: mortgage amount (positive) FV: 0 PMT: answer from 1) (negative) 3) 1 INPUT X (x= how far into mortgage by mo) 4) GOLD AMORT, ENTER, ENTER, ENTER 5) add the cost to refinance to the last balance displayed