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 yield

Answer 5

corporate rate x (100% - tax bracket)

Question 6

tax-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 of 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

(1 + cumulative return) 365 / days held

Question 13

inflation-adjusted (real) return

Answer 13

total returns - consumer price index (CPI)

Question 14

after-tax return

Answer 14

total return - marginal tax bracket

Question 15

rule of 72

Answer 15

72 / known interest rate = # of years to double investment;

72 / known number of years = interest rate required to double investment

Question 16

arithmetic mean

Answer 16

simple average of the numbers

Question 17

median

Answer 17

the number in the middle

Question 18

mode

Answer 18

the number appearing most frequently

Question 19

range

Answer 19

the difference between the highest and lowest numbers

Question 20

alpha (RF not given)

Answer 20

actual return - (beta x market return)

Question 21

alpha (RF given)

Answer 21

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

Question 22

sharpe ratio

Answer 22

actual return - RF / standard deviation