Other Formula/Calc Memorization

Question 1

Real rate of return

Answer 1

With inflation a factor

[(1+return)/(1+inflation)-1] x 100

Question 2

Capital retention method (income need)

Answer 2

(Income-SIS)/(rate of return-inflation)
+ 1st Year need

Question 3

Actual cash value (ACV)

Benefits paid

Answer 3

Replacement cost - depreciation

Benefits paid = ACV - deductible

Question 4

Coinsurance formula

Insurance required
Insurance payout

Answer 4

Insurance required= replacement cost x coinsurance %

Insurance payout =
[(insurance carried/insurance required) x loss] - deductible

Question 5

Disability payout $

Answer 5

Base benefit +( SIS Benefit - SS Disability)

Question 6

Annuity inclusion & exclusion ratio

Answer 6

Exclusion ratio= investment / expected return

Inclusion ratio = 1- exclusion ratio

Question 7

Bond purchase taxability

With accrued interest

Answer 7

Taxable interest = interest - accrued interest paid for

Basis = purchase price - accrued interest

Question 8

TIPS Interest

Answer 8

Adjusted every 6 months

$1k par x (CPI/2 + 1) = current PV

PV current x coupon rate = interest payment

Question 9

Bond conversion value

Answer 9

(PAR/conversion price) x stock price

Subject to floor, lesser of CV or value as bond

Question 10

Net operating income (property CF)

Answer 10

Gross rental receipts
+ non rental income
= potential gross income

• vacancy & collection costs
  = effective gross income
• operating expenses
  = net operating income (NOI)

Question 11

Coefficient of variation.

Answer 11

STDEV / Average Return

Question 12

Dividend discount model
With 2 dividend growth rates

Answer 12

Always calculate with second growth rate

Rate 1 > 2 = next highest #
Rate 1 < 2 = next lowest #

Question 13

CAPM Risk Premium

Answer 13

Beta (Rm - Rf)

Question 14

CAPM

Answer 14

Rf + Beta (Rm - Rf)

Question 15

Manager’s Alpha

Answer 15

Rp - CAPM

Question 16

R2 Rules (ratio analysis)

Answer 16

R2> 60 use Jensen then Treynor
R2< 60 use Sharpe

Question 17

Margin maintenance call at current price

Answer 17

(Market value x maintenance margin %) - (market value - initial margin $ required)

Question 18

Calculate deductible casualty loss

Answer 18

Lesser of Basis or FMV
-insurance coverage
-$100 floor
-10% of AGI

Question 19

Equivalent tax deduction

Answer 19

Tax credit / tax bracket

Question 20

Equivalent tax credit

Answer 20

Deduction x tax bracket

Question 21

Installment Sale Gain

Answer 21

Gross profit % = profit / contract price
Gain =installment x gross profit %

Question 22

Like kind exchange w/BOOT

Answer 22

Impute: FMV of received property, adjusted basis, and BOOT

1) realized gain = FMV + Boot - adjusted basis
2) recognized gain= lesser of realized gain or boot
3) FMV- (realized gain - recognized gain)

Question 23

1245/1231 gain calculation

Answer 23

1) look back and recapture lesser of CRDs or realized gain on adjusted basis (1245)

2) any excess gain is is 1231 cap gain

No 1231 recovery when Gain > CRDs

Question 24

Charitable Bargain Sale

Answer 24

(Sale Price / FMV) x Basis = adjusted basis

Sale price - adjusted basis = taxable gain

*claim charitable tax deduction

Question 25

AMT Payable

Answer 25

AMT Tax - Regular Tax

Question 26

AMT Calculation

Answer 26

AGI (regular post deduction 1040 INC) + ADD BACK ITEMS + Preference Items = AMT Base - Exemptions = AMTI (alt min taxable income) x 28% AMT rate (or 26%) = AMT

Question 27

Alimony Recapture

Answer 27

Year 1 and 2: (alimony1 + alimony2) - constant $37,500 = recapture W/ year 3: (2x alimony year 3) + $37,500 = new constant Then V Alimony1 + Alimony2 - new constant

Question 28

Taxation of Social Security (Provisional Income)

Answer 28

Provisional Income = income(AGI) + 1/2 SS benefit $25k/$32k. 50% included $34k/$44k. 85% included

Question 29

Social security benefit calculations Early & working while benefitting

Answer 29

Reduced benefit = PIA - ((months early /180) x PIA) Working w/ benefit before FRA Deduct $1 for every $2 over limit 1 Deduct $1 for every $3 over limit 2 (Limits given)

Question 30

Traditional DB calculation method Unit benefit

Answer 30

(% per year)x(years of service)x(average compensation)

Question 31

Traditional DB calculation method Final average

Answer 31

Average of last 3 years Capped at $245k

Question 32

Traditional DB calculation method Past service credits

Answer 32

(% per year)x(all years of service)x(final 3 years average compensation)

Question 33

Income replacement ratio

Answer 33

(% per year)x(years of service)

Question 34

ADP/ACP testing

Answer 34

(Elective deferral / employee matching) + profit share

Question 35

DB Excess Method (Disparity)

Answer 35

Disparity = Lesser of Base % or 26.25% Base benefit + disparity

Question 36

DC excess method (disparity)

Answer 36

Disparity = lesser of base or 5.7% Base + disparity = excess Up to $147k wage base Base contribution = contribution base % x $147k base Excess= (Salary - $147k) x excess %

Question 37

Donee Pays Gift Tax

Answer 37

(Taxable Amount x 40% tax) / (1+ 40% tax)

Question 38

Insurance claim paid w/ coinsurance

Answer 38

{(Insurance coverage)/(replacement cost x coinsurance %) x damages} - deductible

Question 39

Disability benefit (insured pays premium)

Answer 39

Salary x coverage % No tax

Question 40

Disability benefit (employer pays premium)

Answer 40

Salary x coverage % x (1-tax rate)

Question 41

Monthly Disability Benefit (SS factor)

Answer 41

Base Benefit + (SIS - social security benefit )

Question 42

Policy Surrender tax calculation

Answer 42

Net cash value + loans - premiums paid + dividends used for premium Taxed at ordinary income

Question 43

Holding period return with margin

Answer 43

{(Sale$ - Margin Basis$ - margin expense $) Buyers Basis$} / Buyers Basis$

Question 44

Bond price change

Answer 44

Duration x (interest rate change/(1+YTM)) x Price Interest rate change: Increase (-), decrease (+)

Question 45

Margin deposit $

Answer 45

(Price x shares x margin%) + put premium

Question 46

Installment Sale -> sold early to related party (Seller & Purchaser gain)

Answer 46

Seller: Full Gain on Original Basis Purchaser: Gain on Value Received (new basis)

Question 47

Community property gross estate

Answer 47

(All assets - noncommunity property) /2

Question 48

Adjusted basis on gifted, appreciated property

Answer 48

(Appreciation at gifting x 40% tax) + original basis

Question 49

Taxable gift with debt And type of gain

Answer 49

Gift = debt - basis Capital gains rates

Question 50

Net Estate Tax Due

Answer 50

Gross Estate +gift taxes paid last 3 years + adjusted taxable gifts - $12,060,000 exemption x 40% estate tax rate - gift taxes paid

Question 51

Charitable Bargain Sale Adjusted Basis

Answer 51

Sale Proceeds Received/ FMV x Basis

Question 52

Charitable Bargain Sale Taxable Gain

Answer 52

Sale Proceeds Received - Adjusted Basis

Question 53

Life insurance taxable gift

Answer 53

Interpolated terminal value (given) + unearned premium (replacement value) Deduction of annual exclusion applies

Question 54

Covariance formula

Answer 54

COV = correlation coefficient x (STDEV 1 x STDEV 2) Correlation coefficient = COV / (STDEV 1 x STDEV 2)