Calculations

Question 1

After-tax return calculation

Answer 1

nominal return × (1 - tax rate)

Question 2

Effective annual rate of return

Answer 2

(1 + annual rate/number of compounding periods in a year)^n - 1

Question 3

Sharpe ratio (for calculating risk adjusted returns)

Answer 3

(return-risk free rate)/SD

Question 4

Treynor ratio (for calculating risk adjusted returns)

Answer 4

(return-risk free rate)/Beta

Question 5

PA calculation

Answer 5

9X (earnings x pension rate) -600
OR for pension based on avg earnings 9X(avg earnings X pension rate X years of service)-600

Question 6

TVM calc (will use calculator for this)

Answer 6

FV = PV x (1 + i) ^ n

Question 7

What is the interest rate to use on financial calculator for an annual interest rate compounded more frequently than annually

Answer 7

interest rate/number of times compounded in a year

Question 9

FV of an annuity (will use calculator for this)

Answer 9

FV = PMT x [(1 + I) ^ n – 1] / I

Question 10

Compound interest amount formula

Answer 10

A = P (1 + r / n) ^ (n * t)
A = amount after time t
P = principal amount
r = annual interest rate
n = number of times interest is compounded per year
t = time the money is invested or borrowed

Question 11

calculate the lease payments on a car with the following info:
Vehicle Price (MSRP): $30,000
* Lease Term: 36 months
* Residual Value Percentage: 50% of MSRP
* Annual Interest Rate: 3%
down payment $2000

Answer 11

Residual Value: $30,000 (MSRP) × 50% = $15,000
Depreciation Fee: ($30,000 - $15,000) / 36 mths = $416.67 per month

Interest Charge:
Money Factor = 0.00125 which is 3% / 2400

(Capitalized Cost + Residual Value) × Money Factor
Capitalized Cost is the negotiated selling price minus the down payment.
($30,000 - $2,000) + $15,000 = $43,000
$43,000 × 0.00125 = $53.75 per month

Total Monthly Lease Payment:
Depreciation Fee + Interest Charge
$416.67 + $53.75 ≈ $470.42

if fees are rolled in as well, divide total fees by number of months and add to mthly cost