Formulas and their usage Flashcards
company issues a stock dividend:
1. new number of shares
2. new cost basis per share
- # shares owned x dividend%
- total initial investment/total shares owned (include new shares)
market capitalization
curr.market$ x shares outstanding
gain/loss of sale of gifted securities
sale price-donor’s cost basis or market val. at time of gift (whichever is lower)
may be short or long term depending on how long they are held
gain/loss of sale of inherited securities
sale price - market value at death of donor (holding period is always long-term)
conversion ratio of a convertible preferred stock
par value of preferred or bond ($100 or $1000 for bonds)/conversion price
parity price of common stock
-where common stock price equals the value of the convertible security
convertible market price/conversion ratio
parity price of convertible preferred stock
price at which the convertible preferred stock should trade to be to have the same value as the common stock into which it can be converted
common stock price x conversion ratio
current yield
annual interest/current market price
municipal bond taxable equivalent yield and when it is used
-used to compare with taxable securities since nominal yields appear lower since they are not subject to federal (sometimes state and local) taxes
-subject to state taxes if out of state
muni yield/(1-tax rate)
calculate a taxable bond’s net (after-tax) yield
taxable yield x (1-tax rate)
determine capital gain or loss of a muni cipal bond that was purchased at a premium or discount and sold prior to maturity
sale price - amortized or accreted basis
amortization=premium/maturity term years–> multiply number of years held
accretion=discount/years held
sales charge %
(POP-NAV)/POP
calculate POP
NAV/(1-salex charge)
change in value of an ETF or inverse ETF
ETF:
original value+%increase in value
original value-%decrease in value
Inverse:
original value+%decrease
original value-%increase
option premium
intrinsic value+time value
