Book 1 Flashcards by Jman Study

Yield to Call Date or Put Option = ?

Annual Income /

(Purchase Price + Call or Put Price
___________________________
2)

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Rule of 72 = ?

72/Return = Time to Double

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YTM = Yield to Maturity = ?

Annual Income / Average Price

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Current Yield = ?

Annual Interest in Dollars / Bond’s Market Price

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CAPM: Risk Premium = ?

Beta x

(Excess of Expected Market Return
_____________________________
Risk-Free Rate of Return)

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CAPM: Expected Return of a Specific Investment = ?

Risk-Free Rate of Return + Risk Premium

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FV = Future Value = ?

FV = P(1+r)^n

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Real Rate of Return = ?

Nominal Rate - Inflation Rate

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After-Tax Yield = ?

After-Tax Yield = Taxable Investment =

Taxable Yield x (100% - Tax Bracket %)

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Sharpe Ratio = ?

(Total Return - Risk-Free Rate of Return)
________________________________
Portfolio Standard Deviation

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Total Return on an Investment = ?

Income = (Dividends for Equities, Interest for Debt)

Growth

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Portfolio Returns: ROI Formula = ?

(Sum of all Cash Flows from Investments / # Years)
______________________________________
Investment Amount

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Broker Loan Rate = ?

AKA = “Call Loan Rate”

Loans = callable any time

Broker Loan Rate = Rate Banks Charge to brokers on loans where securities are collateral.

200 basis points higher than Discount Rate.

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Prime Rate = ?

Rate at which banks make unsecured loans to their most commercial customers.

200 basis points above Broker Loan Rate.

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Discount Rate = ?

Rate Fed charges Member Banks to borrow reserves directly from The Fed = Discount Rate

100 basis points above Fed Funds Rate.

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Fed Funds Rate = ?

Rate of Interest that Member Banks charge each other for overnight loans.

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Multiplier Effect caused by = ?

Change in Reserve Requirements by Fed

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Monetarist Theory = ?

Fed Reserve drives economic cycles

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Supply-Side Theory = ?

Decrease government spending.
Decrease taxes.

Individuals have incentive to PRODUCE.

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Keynesian Theory = ?

Increase government spending –> Transfer Payments to Individuals.

to stimulate CONSUMPTION.

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Debt/Equity Ratio = ?

Long Term Debt
__________________
Total Stockholders’ Equity

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Quick Ratio = ?

Current Assets - Those Not Easily Turned into Cash
_____________________________________________
Current Liabilities

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Current Ratio = ?

Current Assets
_________________
Current Liabilities

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Balance sheet: Net working capital = ?

Current Assets - Current Liabilities

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Balance sheet: Assets = ?

Liabilities + Net Worth = Assets

Balance sheet: Net worth = ?

Net worth = Assets - Liabilities

Dividend Payout Ratio = ?

Common Dividend Paid ________________________ Earnings for Common

Earnings per Common Share = ?

Earnings available for Common _________________________ Common Shares Outstanding

Net Profit Ratio: Net Profit = ?

Net Income after Tax ______________________ Net Sales

Operating Margin of Profit Ratio: Operating Margin of Profit = ?

Operating Profit ___________________ Net Sales

Options: BUY for = ?

PROTECTION. Buy for PROTECTION. Buy to PROTECT the stock.

Options: SELL for = ?

PROFIT. Sell for PROFIT.

Return on Common Equity = eqn?

net income _________ shareholder's equity

shareholder's equity = ?

Total assets - Total Liabilities

Return on Common Equity = ?

Net Income after Tax _________________ (Common at Par + Capital in excess of par + Retained Earnings)

CAPM = Capital Asset Pricing Model = ?

ER = Rf + B(ER - Rf) ERm = Expected return, market Rf = Risk-free rate B = Beta

Best credit rating for high-yield bonds?

Alpha = ?

R - Rf - (beta Rm - Rf) R - (beta Rm) [IFF Rf = 0)

Basis quote: Yield to maturity quote: If market yields INCREASE, then basis quote ___ and bond price ___

INCREASE DECREASE

Basis quote: Yield to maturity quote: If market yields DECREASE, then basis quote ____, and bond price _____.

DECREASE INCREASE

Net working capital = ?

Cash + Accounts receivable + Inventory

Gross Operating Profit = ?

Gross sales - Cost of goods sold

The federal reserve will loan funds at the discount rate to whom?

Commercial Banks only.

Quick Ratio = ?

(Cash & Equivalents + Marketable Securities + AR) ____________________________ Current Liabilities

- - Income statement - - Balance sheet - - Statement of changes in stockholders' equity - - sources & uses of cash statement what report is this?

Corporate Annual Report

federal open market committee BORROWS money from commercial banks, DECREASES money supply and INCREASES interest rates. what type of fed action?

Reverse Repurchase

federal open market committee LENDS money to banks. INCREASES money supply and DECREASES interest rates. what type of fed action?

Repurchase

Rf = Risk free rate of return = what?

1-year Treasury Bill average (short-term)

Risk premium = what?

amount interest above the Rf

efficient market theory technical analysis = doesn't work fundamental analysis = does work. what form?

weak form

efficient market theory fundamental and technical analysis = doesn't work. insider information = does work. what form?

semi-strong form

efficient market theory NO ONE CAN BEAT THE MARKET what form?

strong form

Oversold an oversold condition in the market occurs when the market price averages are _____ daily. But the strength of the market decline (the number of issues declining versus the number of issues advancing) is ______.

DECREASING WEAKENING

oversold when the market is oversold, it is approaching a _____ The next market will most likely be _____

trough upwards

what period is this? 1. issuers are more likely to see fixed income securities. 2. issuers are likely to sell non-callable issues. 3. holders are likely to realize capital appreciation on fixed income securities that are not close to maturity. 4. holders receive payments on fixed income securities that buy more in real terms. 5. prices fall, money buys "more" in real terms. 6. interest rates fall. 7. long term debt prices rise. 8. issuers are increasingly likely to sell fixed income securities (it costs them less) 9. issuers are increasingly likely to sell non-callable issues, because interest rates decrease, therefore no need to call-in such issues (when financing rates are so favorable). what type of period is this

DEFLATIONARY PERIOD.

Dicount: When interest rates RISE, yields on existing securities will riseand the prices will ____ -- issues will __ call in callable securities.

FALL NOT CALL IN CALLABLE SECURITIES

Bonds - big point Price at a discount: All yields are ____ the coupon

above

Bonds - big point Price at a premium: All yields are ___ the coupon

below

Bond volatility: Bond volatility is MORE volatile with ____ interest rates and ____ prices.

SHORT TERM INTEREST RATES LONG TERM PRICES

Bonds, price, volatility Bond prices become MORE volatile with ___ maturities and ___ coupons?

LONGER MATURITIES LOWER COUPONS

bonds with the most volatile price are

zero coupon bonds

Less volatile bonds have ___ maturity and ___ coupons.

SHORTER MATURITY HIGHER COUPON

Net operating profit = ?

Operating profit - bond interest expense - taxes

gross profit margin = ?

gross sales - cost of goods sold

Net operating margin = ?

gross profit - admin & marketing costs

Net profit margin = ?

operating profit - bond interest expense - taxes

If market interest rates decline, a bond's yield to maturity, YTM, will ____

FALL

this measures the risk adjusted rate of return relative to portfolio volatility?

Sharpe Ratio

Sharpe Ratio formula

Rate of Return - Risk Free Rate of Return ________________________ Std Dev

For bonds, IRR = ?

YTM

Return on Common Equity = ?

Net Income _________ Shareholder's Equity

Recession def?

decline in GDP for 2 quarters (or more)

1. discount rate = raise/lower 2. fed funds rate = daily open market operations 3. money multiplier = change bank reserve requirements 4. money velocity = speed deposits clear bank to bank, fed imposes maximum clearance times this is what?

federal reserve tools

theme: corporate debt: when is the date the board announces distribution?

declaration date, set by BOD

when is the deadline date decided by the BOD to own shares, in order to get the dividend?

record date, set by BOD

when is the day the stock is reduced by the dividend amount?

ex date, set by FINRA, 1 business day prior to record date.

when is the date on which the divided is paid?

payable date, set by issuer

conversion ratio for convertible preferred

par value of bond ____________ conversion price

parity price for convertible preferred

conversion ratio x stock's market price

parity price of stock related convertible preferred bond

bond market value ___________ conversion ratio

debenture (def)

long term, unsecured corporate bond backed by full faith and credit of issuer

convertible bond - how to do conversion

$1,000.00 par __________ conversion ratio

convertible bond --> conversion price?

conversion price = (par value of bond / conversion ratio)