Calculations & Formulas Flashcards
How to calculate mean & standard deviation of a single investment
Use Sigma+, x and Sx (Gold 7 & 8)
Return 1, Sigma+
Return 2, Sigma+
Return n, Sigma+
x (Gold 7) = Mean
Sx (Gold 8) = Standard Deviation
Calculate:
IRR, NPV, Expected Rate of Return
- Use CFj
- CF0 is usually zero
- If a rate is given, enter as I/YR.
- IRR calcs the expected rate.
- Negative NPV generally means overpaid.
Calculate Geometric Mean
(Steps)
Geometric Mean Example
If given returns: 30%, 40%, -40%, -20%
- Level-set to $1: 1.30, 1.40, 0.60, 0.80
- Multiply: 1.3 x 1.4 x 0.6 x 0.8 = 0.8736
- Calc: n=4, PV= -1, FV=0.8736
- Solve for I/YR = -3.32%
Holding Period Return (HPR)
Buy 100s stock at $100 on margin (50%)
Margin Interest = 12%
After 1 year, sold at $150/share.
What is HPR?
Calculate bond price change, given the duration and a yield change.
Maintainence Margin Formula
Margin Requirement =
(1-Initial Margin %) / (1-Maint Margin %) x Purchase Price of Stock
Ex: (1-.50) / (1-.25) x $150 = .50/.75 x $150 = $100
Margin Call Example
Reminder: First calc loan amount. That’s a constant. Only your equity shrinks.
Currency Exchange Calc
& Currency Futures
Multiply, Multiply, Divide!
Loan Amorization
Calc Loan
1+”INPUT”+[# of pmt end amort]
Gold+”AMORT”
Keep pressing “=”
Coefficient of Variation (CV):
Compare risk of 2+ investments, given their mean returns & standard deviations
Standard Deviation /
Mean Return.
Lowest result is lowest risk.
Questons asking for Duration of a Bond
Shortcut: Look at maturity of a coupon bond and take lower number.
Note: If lower number is too close (e.g., 9.9 on a 10-year maturity) go to next lower choice.
Formula is given, but a time drain.
Reduction in Social Security if starting before FRA
(Based on # of months before FRA)
(# months before FRA / 180) x PIA
Ex: ( 24 / 180 ) x $1,000 = Reduction $ amount
