Investment Formulas To Memorize

Question 1

Current yield

Answer 1

Annual interest in dollars / bond’s market price

Question 2

Property’s intrinsic value

Answer 2

Net operating income / capitalization rate

Question 3

Intrinsic value of a call

Answer 3

Market price - exercise price

Question 4

Intrinsic value of a put

Answer 4

Exercise price - market price

Question 5

Tax-exempt yield

Answer 5

Taxable yield * (1 - Marginal Tax Rate)

Question 6

Return on Equity (ROE)

Answer 6

Earnings available for common (EPS) / Common equity (net worth or book value)

Question 7

Dividend Payout Ratio

Answer 7

Common dividends paid / Earnings available for common (EPS)

Question 8

Margin call

Answer 8

[(1 - initial margin percentage)/ (1 - maintenance margin percentage)] * purchase price of stock

Question 9

Price / Earnings Ratio = P/E Ratio

Answer 9

Current market price / earnings

Question 10

Measures relative variability to compare investments with varying rates of return and standard deviations. = standard deviation/expected return

Answer 10

Coefficient of variation