Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Shawna's Mnemonics > Danko Additional - March > Flashcards

Danko Additional - March Flashcards

1
Q

Use of Payment Begin or End

A

Begin Mode:
College Tuition
Retirement Benefits
Family Needs

End Mode:
401K Deferral
Profit Sharing Contributions
Bond Interest Paid
Mortgage Payments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Three variations of questions involving unequal cash flows

A
  1. Calculate PV = always enter zero as first input + I/YR hint: OPP
  2. Calculate IRR (dollars weighted return) = initial investment is a negative input hint: I -initial
  3. Calculate NPV = always enter the initial investment as a negative input + I/YR hint: N negative
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

NPV (net present value)

A

The difference between the PV, and the amount of initial outlet is the net present value (NPV)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What happens when NPV is zero?

A

The IRR is also zero and matches the npv

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Which investment vehicles should the emergency fund be invested in?

A

checking accounts
Government, money market accounts
CD if close to maturity less than 90 days
Saving accounts
Laddered CDs less than six months maturity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Financial Statements - Yearly Debt

A

Found on Cashflow statement. Does not include taxes and insurance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Chartered Bank Regulators

A

Federally/Nationally Chartered - Comptroller of the currency, Federal Reserve, & FDIC

State Chartered - the governing state, Federal Reserve, FDIC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

After Tax Mortgage Payment for the Year

A
  1. End mode +12 per yr
  2. Solve for Payment
  3. multiply payment by year worth of months
  4. round down the payment amount of the year
  5. multiply rounded payment by tax bracket
  6. subtract the interest from the full amount of payments made for the year.
    RESULT IS AFTER TAX PAYMENT FOR THE YEAR
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Holding Period Return (Question Format) + calculation

A

What is the rate of return?
What is his/her HPR?

Sold price + income - purpose price/ purchase price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

After Tax HPR Calc Steps

A
  1. Find out net gain
  2. Is it long-term or short term
  3. Calculate 1- (the tax withholdings)
  4. Multiply the net gains by the results of #3
  5. The after tax gain!
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

YTM (Yield to Maturity) Calculation

A

IT’S A TVM QUESTION!!
END MODE + 2 P/YR
N/I/PV/PMT (50% of annual coupon) / FV ($1K)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

IRR - Internal Rate of Return

A

NOTE: P/YR function affects the IRR. set it to 1 P/YR!
Always net the annual activity
Use cashflow key, then IRR key

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

YTC (Yield to Call) Calculation

A

Same as YTM except the FV is the ‘call price’ and maturity date is replaced with ‘call date’.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Current Yield Calculation

A

Annual Interest $/ Current Market Price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

TEY (Tax EQUIVALENT Yield) [Question Format & Calculations]

A

the return that a taxable bond needs to possess for its yield to equal the yield on a comparable tax-exempt bond, such as a municipal bond.

If question has muni and tax bracket info use TEY

Muni (tax exempt Yield/1- (tax bracket)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Tax EXEMPT Yield

A

Converts yield to tax exempt!

If question has taxable corporate bond yield AND muni yield + tax bracket use EXEMPT yield calculation.

TEY x (1-tax rate)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Geometric Return Calculation

A

add each return by 1 (example 1+8% =1.08).
2. add all values together. sum = PV
3. TVM = N, I=?, PV=sum, FV = 1
4. solve for I

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Duration (reallocation)- Question/Calculation

A

Find out current portfolio duration:
1. Get the average of the current portfolio duration by adding the duration of each bond then divideingto.This will become the target duration.
9 + 5.6 = 14.6/2 = 7.3 duration

THEN:
Take the corresponding potion percentage. Example:
40% X: 60% Y = (40% of 9) + (60% of 5.6) = 3.6 + 3.36 = 6.96

reallocation of proportion of bonds works with 40%/60% blend

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Dividend Growth Model - Question/Calculation

A

*you can use to determine if a stock is over or undervalued

IS THIS STOCK A BARGAIN OR OVERPRICED??

A. What is the estimated price of a stock paying XX in dividends with a growth rate of XX and a required rate of return of XX?

B. If stock is selling for XX, would you suggest client purchase?

D(1+g)/r-g

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Expected Return

A

*you can use to determine if something will make the required rate of return.

Do(1+g)/price) + g = percentage

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Price/Free Cash Flow - Question/Calculation

A

Similar to the dividend discount model, however the dividend is replaced by the free cash flow.

FCF0(1+g)/r-g

what is the maximum price that should be paid for XXX common stock?

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

DDM shortcut [stock with accelerating or declining growth rates]

A

Shortcut #1: If 1st growth rate is LOWER than 2nd use DDM w/second return only. Then choose next LOWEST number below DDM result.

Shortcut #2: If 1st is HIGHER then 2nd use DDM w/second return only. Then choose next HIGHEST number above DDM result.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Dividend Payout Ratio

A

“of all the money you had to payout, how much did you actually payout?”

COMMON dividend/Earnings per share

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Book Value per share

A

Book Value/Shares Outstanding

Will sometimes be used as an extra step to determine Dividend Payout Ratio calculation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

CML (Capital Market Line)

A

MACRO MACRO MACRO

Specifies the relationship between risk and return on the portfolio instead of just one investment.

Reveals:
Expected return on a fully diversified portfolio

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Rf

A

risk free return… 100% T-bills.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

SML (Security Market Line)

A

S = SINGLE and portfolio asset valuation. Can be used to value ANY asset.
Vertical axis = expected return. Horizontal = Beta
ri = rf +(rm - rf) B1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Stock Risk Premium

A

(Erm - rf) B

an excess return that investing in the stock market provides over a risk-free rate. This excess return compensates investors for taking on the relatively higher risk of equity investing.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Activity Ratio

A

Measures how rapidly a firm is able to convert various accounts into cash.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Technical Analysis

A

Charting
Support
Resistance
Sentiment Indicators

31
Q

Fundamental Analysis

A

Consider economic factors such as rates of inflation and unemployment. GDP.

32
Q

The Dow Theory

A

Shows direction of overall market.

33
Q

Barron’s Confident Index

A

compares returns on higher vs lesser bonds.

34
Q

Dow Jones

A

Price-weighted average
Most widely quoted and narrow focus

35
Q

S&P 500

A

Broader measure of NYSE activity.

36
Q

Russell 2000

A

Popular CAP WEIGHTED index. Covers bottom 8% of Russell 3000

37
Q

Wilshire 5000

A

BROADEST measure of activity. Value weighted.

38
Q

Value Line

A

EQUALLY WEIGHTED

39
Q

NASDAQ

A

Broadest measure of OTC trading. CAP WEIGHTED

40
Q

Stock Split

A

Makes ownership of stock more affordable.

500 shares/$90 = $750 shares/$60

stock split 3/2. what is 3/2? 1.5. 1.5 * 500 shares = 750 shares

PRICE IS RECIPRICOL!!
2/3 = .6667. $90* .6667 = 60

41
Q

Reverse Split

A

Raises price of outstanding shares

42
Q

Wash Sale

A

30 days before and after sale of loss you cannot repurchase stock or bond within that time frame. If you purchase within the amount of the original loss sale is added to cost basis of recent purchase.

43
Q

Sharpe Ratio

A

Ratio of excess return of the portfolio to its Standard Deviation. Used for mutual funds with low R^2

44
Q

Ex-Dividend Date timing

A

PED = Purchase Date > Ex-Dividend date > Date of record

45
Q

Alpha Ratio (formally Jensen)

A

Measures the contribution of the portfolio manager.
MOST WIDLEY USED
BETA!!!!

Rp - [Rf + (Rm - Rf) B]

46
Q

Treynor Ratio

A

Ratio of excess return of the portfolio to its BETA

*BETA is the systematic risk of the asset not the market.

47
Q

FUN FACT

A

Alpha of an S&P 500 fund = 0
Beta of an S&P 500 fund = 1

48
Q

R^2

A

Square is the square of correlation coefficient. Index funds R^2 is close to 100%. Sector funds will have low R^2.

R^2 is greater than 60 = diversified portfolio
R^2 is less than 60 = nondiversified portfolio

49
Q

Social Security earned income reduction amounts.

A

Parttime: $1 from each $2 earned above $21,240.
Fulltime: $1 from each $3 earned above $56,520.

50
Q

Provisional Income for the taxation of Social Security

A

$25K for single
$32K for married

51
Q

Pure Life

A

Highest payout for the beneficiary for his /her lifetime. No benefits for spouse.
Also called Pension Maximization or Pension Max application

52
Q

PIA

A

The “primary insurance amount” (PIA) is the benefit (before rounding down to next lower whole dollar) a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age.

53
Q

Programs Covered by Social Security Act

A

OASDI
Medicare
Fed Unemployment
SSI (supplemental security income

54
Q

Fixed Contributions (DB plans)

A

Money Purchase Plan
Target Benefit Plans

55
Q

Employment categories NOT covered by OASDI

A

Federal employees that are employed before 1984
Americans working abroad.
Railroad employees
Child under 18 in unincorporated business
Ministers
Members of tribal council
some state employees and teachers

56
Q

FLEXible Contributions (Defined Contribution plans)

A

Profit Sharing Plans
Stock Bonus Plan

57
Q

Defined Contribution Plans

A

Vesting schedule/admin costs/ exempt from creditor/integrated with social security.

Money Purchase Pension
Target Benefit Pension
Profit Share Plan
Stok Bonus Plan

58
Q

Pension Plans

A

Defined Benefit Pension
Cash Balance Pension
Money-Purchase Pension
Target Benefit Pension

SPOUSE DETERMINES BENEFICIARY

59
Q

What type of entity cannot do an ESOP?

A

Sole Proprietor or Partnership

60
Q

When can you pull money penalty fee.

A

55 - Qualified plans and 403B + separate from service
59 1/2 - IRA

61
Q

Benefits of a qualified plan

A

Contributions to the plan are tax deductible to the business.
Contributions are not currently taxable to the participants.
Contributions made on behalf of employees can be paid with dollars that would have otherwise been spent on taxes.
Earnings on contributions grow tax deferred.
Qualified plans are protected from creditors.
Provides a valuable benefit to employees and helps to attract and retain employees.
Taxation of benefits are deferred until taken in the future.

62
Q

SEPTA-N

A

Profit Sharing Plans (7):

401K
Stock Bonus Plan
Employee Stock Plan
Profit Sharing Plan
Thrift Plan
Age-Based PSP
New Compatibility

63
Q

Highly Compensated Employee (HC)

A

A more than 5% owner at anytime during the plan year OR proceeding year.
Current year: Employee with compensation in excess of $150K.
Prior Year: An employee with compensation in excess of $135K.

64
Q

Qualified Plans (To void 10% penalty)

A

MESS AT DQ
Medical Expenses, Equal periodic Payments, Separation from Service, Age, Tax levies, Death/Disability and QDRO

65
Q

IRA (To avoid 10% penalty)

A

HIDE ME
Home purchase, Health Insurance, Death and disability, Education, Medical expenses, Equal periodic payments… AGE

66
Q

Profit Sharing Plan that favors Savers and Young Persons

A

401K and Thrift Plans

67
Q

Profit Sharing Plan that favor highly compensated young persons

A

Profit Sharing Plans

68
Q

Profit Sharing Plan that favors Highly compensated and long length of service

A

Stock Bonus Plan and ESOP

69
Q

Profit Sharing Plan that favors older highly compensated

A

Age-Based Profit Sharing Plan

70
Q

Profit Sharing Plan that favors owners

A

New Comparability Plan

71
Q

Mandatory Funding Plans

A

Pension Plans - Defined Benefit, Cash Balance Plan, Money Purchase Plan, Target Benefit

72
Q

Less Expensive Plans

A

Cash Balance and Money Purchase Plan

73
Q

Self-employment contribution calculation

A

Calculate the self-employed individual’s contribution as:
Contribution Rate / (1 + Contribution Rate) = Self-employed contribution rate

Calculate self-employment tax as:

Net Self-Employment Income
x 92.35%
= Net Earnings Subject to Self-Employment Tax
x 12.4% up to $160,200 + 2.9% on all income
= Self-Employment Tax

o Calculate the self-employed individual’s contribution:

Net Self-Employment Income
- 1/2 Self-Employment Tax
= Adjusted Net Self-Employment Earnings
x Self-employed Contribution Rate
= Self-Employed Individual’s Plan Contribution

74
Q

Disclaimer Clause

A

Must disclaim within 9 mos of the date of death. Disclaim must be in writing.

Shawna's Mnemonics (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions