Calculations Flashcards
Formulas for calculations
Current Yield (stocks)
Annual dividend
_________________
Current market price
Current Yield (debt security)
Annual interest
_________________
Current market price
Tax-equivalent yield
Municipal rate
________________
(100% - tax bracket)
Dollar Cost Average
Total dollars invested
_______________________
Number of shares purchased
Average market price
Share price total
___________________
Number of investments
Shareholders equity
Assets - liabilities
Total return
Income (dividends or interest) + gain/loss
________________________________
Original investment
Annualized return
Total return on an annualized basis
Inflation-adjusted (Real) return
Total return - CPI
After-tax return
Total return - marginal tax bracket
Rule of 72 (interest rate known)
72
____________ = Years to double investment
Interest rate
Rule of 72 (years known)
72
___________ = Interest rate to double investment
Years
Arithmetic mean
Simple average of the numbers
Median
The number in the middle of the list, equal amounts of numbers above and below.
Mode
Number appearing most frequently in a list.
Range
Difference between the highest and lowest numbers.
Alpha (RF not given)
Actual return - (beta x market return)
Alpha (RF given)
(Actual return - RF) - (beta x [market return - RF])
Sharpe ratio
Actual return - RF
_________________
Standard deviation
Four facts about Internal Rate of Return (IRR)
- It is the discount rate that makes the future value of an investment equal to its present value.
- In order to compute, it is necessary to know the initial cost of the investment.
- In order to compute, it is necessary to know the cash flow of the investment.
- It is equivalent to a bond’s yield to maturity.
The value of money today
Present Value
The value of money sometime in the future
Future Value
The difference between the value of money today and sometime in the future
Time Value of Money
Future Value formula
FV = PV x (1 + r)n
Future Value = Present Value times (1 + Rate) to the nth power.
Intrinsic Value
The potential profit to be made by exercising an option.
Market Capitalization
(CMV/share) x outstanding shares
Capital Asset Pricing Model (CAPM)
Required return = Risk Free rate + beta (Market return - Risk Free return)
RF + beta (MR - RF)
