Formulas

Question 1

Holding Period Return Formula

Answer 1

Selling price - purchase price +/- Cashflows
——————————————
Purchase Price or Equity Invested

Question 2

APT arbitrage pricing theory

Answer 2

Standard deviation and beta are not input variables to the APT.
EPT is a multifactor model.
Attempts to take advantage of pricing imbalances

Question 3

Dividend payout ratio

Answer 3

Common stock dividend
———————————-
EPS

Question 4

Return on equity (ROE)

Answer 4

Earnings per share
—————————
Stockholders equity per share

Question 5

Current yield

Answer 5

Coupon payment
————————-
price of the Bond

Question 6

Conversion value

Answer 6

Par
———
CP (conversion price)

X Price common stock

Question 7

Intrinsic value: options

Answer 7

Call option: stock price minus strike price

Put option: price minus stock price

Intrinsic value cannot be less than zero

Time value equals premium - extrinsic value

Question 8

Gain or loss on a stock transaction

Answer 8

“STOPS”

St: stock gain or loss: only if you own the underlined stock

O: intrinsic value equals stock price minus strike price

P: premium paid

S: Shares

Question 9

Exclusion ratio for annuity payments

Answer 9

Investment in the contract ____________________________
expected total return

Question 10

Take formula if given the taxable rate

Answer 10

If given the taXable rate, I need to multiply (X) in the formula.

Taxable rate (r) X (1-t)

Question 11

ROE

Answer 11

earnings per share
————————————
stockholders equity per share

Question 12

ROE

Answer 12

ROE
earnings per share
————————————
stockholders equity per share

Question 13

Dividend payout ratio

Answer 13

Common stock dividend
———————————
Earnings per share

Question 14

PE ratio

Answer 14

PE = stock price
—————
EPS

Question 15

Dividend yield

Answer 15

Dividend per share
————————
Stock price

Question 16

ADP %

Answer 16

Question 17

Who do advisor register with?

Answer 17

Question 18

Self-employment tax calculation

Answer 18

Multiplied by .9235
Times 15.3% (6.2 x2 1.45 x 2)
Divide by two (half the amount)

Times tax rate, usually 20% if maxed

Question 19

Question 20

Dividend payout ratio example

Answer 20

Question 21

Return on equity example

Answer 21

Question 22

Municipal securities

Answer 22

Question 23

Convertible bond example

Answer 23

Question 24

Current yield example

Answer 24

Question 25

Deductions from gross estate

Answer 25