Formulars Flashcards
Market capitalization X
A company’s market capitalization (or market cap) is the price per share multiplied by the number of shares outstanding. If a company has 15 million shares of stock outstanding and the price per share is $10, the market capitalization is $150 million.
Current yield (stock) /
Annual dividend / Current market price
Current yield (debt security) /
Annual interest / Current market price
Number of shares for conversion /
Par value / Conversion price
Parity /
Bond market value / Number of shares
Tax-free equivalent yield X
Corporate rate × (100% – tax bracket)
Tax-equivalent yield* /
Municipal rate / (100% – tax bracket)
NAV of mutual fund share /
Fund NAV/ Number of shares outstanding
Dollar cost average /
Total dollars invested / Number of shares purchased
Average market price /
Share price total / Number of investments
Shareholders’ equity Total return –+
Assets – liabilities
income (dividends or interest) + gain or loss /original investment
Annualized return
Total return on an annualized basis
Inflation-adjusted (real) return –
Total return minus the CPI
After-tax return –
Total return minus the marginal tax bracket
Rule of 72 /
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
Median
In a group of numbers, the one with an equal above and below, i.e., the number in the middle
Mode
In a group of numbers, the one appearing most frequently
Range
In a group of numbers the difference between the highest and the lowest one
Alpha (RF not given) –
Actual return – (beta × market return)
Alpha (RF given) –
(Actual return – RF) – (beta × [market return – RF]}
Sharpe ratio –
actual return – RF / standard deviation
Internal Rate of Return IRR +
Price, Interest rate, Yield to Maturity
A TIPS bond is issued in the principal amount of $1,000, paying 3.5%. Over the security’s 5-year term, the inflation rate is 4%. What is the amount of the final semiannual interest check?
The semiannual interest of a TIPS bond is computed on the basis of the inflation-adjusted principal. Because the principal increases with the inflation rate, at the end of the 5-year term, it has grown to $1,219 ($1,000 × 102% ten times). Therefore, the final interest check is for $1,219 × 1.75% (remember it is a semiannual check).
Discount Cash Flow +
future coupons + maturity value
