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Series 65 Prep > Calculations > Flashcards

Calculations Flashcards

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Series 65 flashcards
1
Q

What is the current yield (stock)?

A

annual dividend/current market price

the return on the investment that the buyer can expect to experience

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2
Q

What is the current yield (bond)?

A

annual interest/current market price

this is the rate of return on a bond investment

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3
Q

What is the tax-free equivalent yield?

A

corporate rate x (100% - tax bracket)

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4
Q

What is the tax-equivalent yield?

A

municipal rate/(100%-tax bracket)

the return a taxable bond would need to yield in order to equal the yield on a comparable tax-exempt bond

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5
Q

How do you calculate the NAV of a mutual fund share?

A

fund NAV/number of shares outstanding

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6
Q

How do you calculate the Dollar Cost Average?

A

total dollars invested/number of shares purchased

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7
Q

How do you calculate shareholder’s equity?

A

Assets - liabilities

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8
Q

How do you calculate total return?

A

income (dividends or interest) + gain/loss divided by original investment

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9
Q

How do you calculate inflation-adjusted return?

A

[income (dividends or interest) + gain or loss/original investment] - CPI

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10
Q

How do you calculate Alpha when risk-free rate is NOT given?

A

Actual Return - (Beta x market return)

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11
Q

How do you calculate Alpha when risk-free rate is given?

A

(actual return-RF) - (beta x [market return-RF)}

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12
Q

How do you calculate the Sharpe Ratio?

A

actual return - RF/standard deviation

measures the risk adjusted return of an investment

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13
Q

What is Net Working Capital?

A

current assets - current liabilities

measures an entity’s liquidity OR solvency AKA ability to pay their debts

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14
Q

What is Market Cap/Capitalization?

A

the number of outstanding common shares x market price per share

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15
Q

What is the book value per share?

A

total assets - liabilities / # of outstanding shares

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16
Q

What is Negative Net Present Value?

A

what occurs from the calculation that determines the money generated in the future is NOT worth more than the initial investment cost

17
Q

What is the risk-adjusted return?

A

return of an investment in relation to the degree of risk taken

18
Q

What is the Dividend Discount Model?

A

used to determine the value of the stock today by determining the present value of all future dividends

19
Q

What is Discounted Cash Flow?

A

helps determine the value of an investment based on its future cash flows

if the DCF is above the current cost of the investment, the opportunity could result in positive returns

20
Q

What is Net Present Value?

A

the difference between the present value of cash inflows and the present value of cash outflows over a period of time

used to calculate current total value of a future stream of payments

21
Q

What is the current ratio?

A

current assets / current liabilities

measures a company’s short term financial health

gauges their ability to pay their current liabilities

22
Q

What is the Gross Domestic Product?

A

consumer spending + government spending + business spending + exports - imports

national output of goods and services

broad measure of economic health

23
Q

What is the Balance Sheet Equation?

A

assets - liabilities = net worth

tells you the net worth of a company

a moment in time, snap shot of the net worth

24
Q

What is cash flow? How do you calculate it?

A

net income (or loss) + current depreciation + amortization

actual cash generated by operations

25
Q

What is the Quick Ratio (Acid Test Ratio)?

A

current assets - inventory / current liabilities

stricter measurement of a company’s abilities to pay its short term obligations

26
Q

What is the debt to equity ratio?

A

total liabilities / stockholders equity

measures how risky a business’ capital structure is

how leveraged (how much in debt) a corporation is

27
Q

What is the dividend payout ratio?

A

annual dividend / earnings per share

measures generosity of the issuer’s board of directors

shows an investor how much of the year’s earnings were returned to shareholders

28
Q

What is future value?

A

the value of a current asset at some point in the future based on an assumed rate of growth

FV = I x [I + (R x T)}

I = investment amount
R = interest rate
T = # of years
29
Q

What is the price to earnings ratio?

A

market price / earnings per share

compares the stock’s current market price relative to its earnings per share

used to determine whether a stock is fairly priced in the market

30
Q

How do you find the put spread breakeven?

A

high strike price - net premium

31
Q

How do you find the call spread breakeven?

A

low strike price + net premium

32
Q

What are the formulas for a Long Put? (max gain, max loss, breakeven)

A

Max Gain = (strike price - premium paid) x 100

Max Loss = premium paid

Breakeven = strike price - premium

33
Q

What are the formulas for a short put? (max gain, max loss, breakeven)

A

Max Gain = premium received

Max Loss = (strike price - premium) x 100

Breakeven = Strike Price - premium

34
Q

What are the formulas for long calls (max loss, max gain, breakeven)?

A

Max Gain = unlimited

Max Loss = premium paid

Breakeven = strike price + premium

35
Q

What are the formulas for a short call? (max gain, max loss, breakeven)

A

Max Gain = premium received

Max Loss = unlimited

Breakeven = strike price + premium

36
Q

How do you calculate earnings per share (EPS)?

A

net income - preferred dividend / common shares outstanding

measures the portion of the issuer’s earnings that is available to common stockholders

Series 65 Prep (7 decks)

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