3/20/2023 Flashcards
Balance Sheet
Assets = Liabilities + Net Worth
Another Word for Net Worth
Equity
Book Value
Net Worth (Equity)
Price/Book Ratio
Price per Share / Book Value per Share
what does book value per share mean
if the company went under you would get this $ amount
Debt to Equity Ratio
Liabilities/ Net Worth (Equity)
Shows a Companies Reliance on Debt
Debt to Asset Ratio
Liabilities / Assets
Contraction
The Part of the business cycle when markets are declining
Monetary Policy
FED regulating the Money Supply to try and stimulate the economy
FED can:
Raise/Lower Interest Rates
Raise/Lower the Reserve Requirement (is a quicker Fix)
It is a tool, different economic theories try to use that tool differently
Reserve Requirement
The amount Banks are required to be held in reserve and can’t be lent out.
FED sets this
FED Lowering RR = Attempting to Expand the Market
FED Increasing RR = Attempting to Contract the Market
Fiscal Policy
Government
Regulating Supply and Demand
and
Taxes
to try to stimulate the economy
It is a tool, different economic theories try to use that tool differently
Classical Economic Theory
Very similar to Supply-Side Theory
The belief that LOW Government Intervention and Taxes in the marketplace is what is best for ecomomic growth
Keynesians Theory
Very similar to Demand-Side Theory
The belief that HIGH Government Intervention and Taxes in the marketplace is what is best for economic growth
Supply-Side Theory
Very similar to Classical Economic Theory
The belief that Increasing the economy’s Ability to Supply (make/produce) more goods is what is best for economic growth
Less government intervention and Taxes
Demand-Side Theory
Very similar to Keynesian Theory
The belief that Increasing the economy’s Ability to Demand (buy/consume) more goods is what is best for economic growth
More Government Intervention and taxes
Balance of Payments
Who is paying Who
ie:
China US
If we buy goods from China we are giving them more money and we are ending up with less
that means the value of Chinese Currency is increasing compared to the US Currency
EPIC
To Protect against Currency Changes:
Exporting - you can buy Puts against the Foreign Currency
Importing - you can buy Calls against the Foreign Currency
Federal Funds Rate
The rate for - When banks borrow from each other
Discount Rate
Banks Borrow from FED Reserve
Basis Points
the way prices are shown on
Corporate and Muni Bonds
to find the actual Price:
move the decimal place to the right one
ie: 93.224 => $932.24
32nd’s
the way prices are shown on
Treasury Bonds
to find the actual Price:
take the numbers behind the decimal point and divide them by 32 then place it on the end of the number
(now its in Basis Points)
Next, move the decimal place to the right one
ie: 93.24 => 24/32=.75 => 93.75 => 937.50
NY
the Coupon rate of the bond
YTM
The Yield you would get if held to maturity
YTC
The Yield You would get if the bond was held to call
CY
the yield of the current year
what we get in 1 yr/ current market price
If bond is at a discount
All Yields will be above premium
because @ maturity you get extra money
If bond is at a Premium
All yields will be below premium
because @ maturity you loose extra money
Draw the Bond SeeSaw
Draw it
Interest rates go up
What happens to bond Prices?
Bond prices go down
Interest rates go Down
What happens to bond Prices?
Bond Prices Go up
what is the duration of Treasury Bonds?
10-30 years
what is the duration of Treasury Notes?
2-10 years
what is the duration of Treasury Bills?
1 month to 1 year
list all the different durations of Treasury Bills
1 month (4 weeks)
2 months (8 weeks)
3 months (13 weeks)
6 months (26 weeks)
1 year (52 weeks)
Draw the Options Diagram
draw it
whats 2 other words for Long
Own
Buy
whats 2 other words for Buy
Long
Own
whats 2 other words for Own
Long
Buy
whats 2 other words Short
Sell
Wrote
whats 2 other words for Sell
Short
Wrote
whats 2 other words for Wrote
Short
Sell
In the Money
Means if the Options Contract is going to go in favor of the buyer and by how much
What are the Steps to understanding a Options Question
Find
1 - Intrinsic Value - the in the money amount
2 - Premium - Amount paid for the contract
3 - Exercised - What Happens if Contract is Exercised
4 - Break Even -
Intrinsic Value
The Value of the Option Right Now
How much they are in the money
Premium = Intrinsic Value + Time Value
Time Value
The Extra Value of the Option In the Future (what the value could be)
the difference between Premium and Intrinsic value
Premium - Intrinsic Value = Time Value
every option unless otherwise stated are sold for how many shares
100 Shares
Yield
what we get / what it cost us
(same thing as return)
the Max Gain of an option is the premium if you are
Short the option (sold the option)
the Max Loss of an option is the premium if you are
Long the option (Bought the option)
