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CFP Additional Need To Know > Formulas & Calcs > Flashcards

Formulas & Calcs Flashcards

1
Q

Current Yield

A

(For stock: dividend/price)

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2
Q

Property Intrinsic Value

A
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3
Q

Intrinsic Value of a Call

A

Market Price - Exercise Price

(COME*)

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4
Q

Intrinsic Value of a Put

A

Exercise Price - Market Price

(POEM*)

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5
Q

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

A

(Taxable yield) x (1-tax rate)

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6
Q

Return on Equity

A
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7
Q

Dividend Payout Ratio

A
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8
Q

Margin Call

A
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9
Q

P/E Ratio

A
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10
Q

Convertible Bond Conversion Value

A
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11
Q

Bond Intrinsic Value

A
  • 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 ?
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12
Q

Callable Bond Intrinsic Value

A

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: ?

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13
Q

Covariance vs. Correlation Coefficient

A

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)

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14
Q

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

A

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

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15
Q

Beta

A
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16
Q

Risk Adjusted Return using Beta

A

Annual return/Beta
(Choose highest #)

17
Q

Real (inflation adjusted) return

A

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

18
Q

Geometric mean

A

(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: ?

19
Q

Internal Rate of Return

A

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

20
Q

Holding Period Return

A
21
Q

Interest rates are expected to rise

A

Shorten duration (buy short term)

22
Q

Interest rates are expected to fall

A

Lengthen duration (buy long maturities)

23
Q

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

A
24
Q

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

A
25
Q

Stock risk premium vs Market risk premium

A
26
Q

Required rate of return (CAPM)

A

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

27
Q

Stock split total new stock share amount

A

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

28
Q

New par value after stock split

A

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

29
Q

Dollar amount of margin call

A

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

30
Q

Mortgage payment calc

A
  • end mode & 12P/YR*
    PV: Mortgage loan amount/balance
    FV: 0
    I/YR: interest rate
    N: years gold P/YR
    PMT: ?
31
Q

College education calc

A

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)

32
Q

Change in price or change in rate (duration given)

A
33
Q

Net after tax mortgage payment for the first year

A

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)

34
Q

Dollar amount of a refinanced loan

A

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

CFP Additional Need To Know (7 decks)

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