Calculations

Question 1

Current Yield (Stock)

Answer 1

Annual Dividend / Current Market Price

Question 2

Current Yield (Debt Security)

Answer 2

Annual Interest / Current Market Price

Question 3

Number of Shares for Conversion

Answer 3

Par Value / Conversion Price

Question 4

Parity

Answer 4

Bond Market Value / Number of Shares

Question 5

Tax-Free Equivalent

Answer 5

Corporate Rate * (11% - Tax Bracket)

Question 6

Tax-free equivalent Yield

Answer 6

Municipal Rate (100% - Tax Bracket)

Question 7

NAV of Mutual Fund Share

Answer 7

Fund NAV / Number of Shares Outstanding

Question 8

Dollar-Cost Average

Answer 8

Total Dollars Invested / Number Shares Purchased

Question 9

Average Market Price

Answer 9

Share Price Total / Number of Investments

Question 10

Shareholders Equity

Answer 10

Assets-Liabilities

Question 11

Total Return

Answer 11

Income (dividends or interest) + gain or loss / original investment

Question 12

Annualized Return

Answer 12

Total return on annualized basis

Question 13

Inflation-adjusted (real) return

Answer 13

Total return - CPI

Question 14

After-tax return

Answer 14

Total return - marginal tax bracket

Question 15

Rule of 72

Answer 15

Divide 72 by known interest rate = number of years to double investment; or, divide 72 by known number of years = interest rate required to double investment

Question 16

Alpha (RF not given)

Answer 16

Actual Return - (Beta * [Market Return - RF] )

The risk adjusted returns that a portfolio manager generates in excess of the risk adjusted retuns expected by the capital asset pricing model (CAPM).

Question 17

Alpha (Rf given)

Answer 17

(Actual Return - RF) - (Beta * [Market Return-RF] )

Question 18

Sharpe Ratio

Answer 18

Actual Return - RF / Standard Deviation

The Sharpe Ratio measures the risk adjusted return of an investment. It is calculated by dividing the excess return of an asset over the 91 day Treasury Bill rate by its standard deviation. It measures the reward per unit of risk so the higher the ratio, the better.