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Inv Formulas > Investments > Flashcards

Investments Flashcards

1
Q

Coefficient of variation

A

Cv= standard deviation/ avg return

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2
Q

Amortization calculation

A

First calculate the payment of the mortgage. Then you do 1,input, # of months the ask for (ex 10years of payments into mortgage they want to refinance), gold AMORT then hit equal and it gives you principal interest and balance remaining

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3
Q

Solve for correlation coefficient or standard deviation in the covariance formula

A

Pij= cov/stand dev of each stock multipled by each other
Solving for standard deviation of one stock= cov/ correlation coefficient multipled by other stock stand dev

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4
Q

Tax exempt yield

A

Taxable yield x (1-marginal tax rate)

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5
Q

Coefficient of variation

A

Standard deviation/mean

Higher % is riskier. Means you are taking on more units of risk to get return

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6
Q

Standard deviation

A

Enter into sigma then hit gold 8

Lower standard deviation is good because it means the returns are tighter to the mean

It measures variability, total risk and non diversified portfolio

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7
Q

Beta

A

Measures volatility, diverse portfolio, systematic risk

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8
Q

Risk adjusted return

A

Realized return/ the funds beta
Highest is best

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9
Q

Simple mean

A

Arithmetic mean simple or compound. Use sigma gold 7

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10
Q

Geometric mean (time weighted return)

A

Measures the performance of the fund manager
-1pv fv=multiply each return by last ex. 15 1.15 -30 .70 solve for I. If the price didn’t move in a year enter it as 1 n= number of years you held

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11
Q

Dollar weighted return

A

The investors actual return
Use cash flows and solve for IRR

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12
Q

Stock split

A

5 for 2
Stock shares 5/2 times the stock shares currently held
Price= flip it 2/5 times current share price

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13
Q

Current yield and current selling price

A

Yield= Annual interest in dollars/ bond market price
Price=annual interest in dollars/ current yield

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14
Q

Property intrinsic value

A

Net operating income/ cap rate

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15
Q

Intrinsic value of call and put

A

POEM and COME
exercised - market
Market- exercise

The intrinsic value can’t be negative lowest is 0

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16
Q

Return on equity

A

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

17
Q

Dividend payout ratio

A

Common dividends paid/
Earnings available for common (eps)

18
Q

Margin call

A

1-initial margin percent/
1- maintenance margin percent =
X purchase price of stock (original purchase)

19
Q

Price/ earnings ratio P/E ratio

A

Current market price/ earnings

20
Q

Conversion value for bond

A

Par/ conversion price given= this x current market price of the stock

When calculating the current bond value you use comparable debt yields as the interest.

21
Q

Holding period return

A

What you sold for-/+(what happened when holding might have to add back here what you had to pay off if you margined it plus interest paid from margin, dividends earned also go here) -out of pocket/

Out of pocket price of investment

What you sold for + earned while held - bought for/
Bought for is another way if it doesn’t have margin

22
Q

Efficient frontier (markowitz model)

A

Above line unattainable
Below line in efficient
Point A is t bills risk free return
Risk adverse person will be steeper line at beg

23
Q

Capital market line cml

A

Macro view (looks at relationship between risk and return) tangent with efficient frontier
Looks at standard deviation
Point b is optimal risky or tangent of the cml
Intersection of cml is risk free or rf tbills

24
Q

Security market line sml

A

Looks at micro and beta for an individual asset
Points above sml are undervalued, below line is overvalued
Sml and cml are components of the capital asset pricing model

25
Q

Efficient market hypothesis

A

Strong form all added in even illegal activity
Semi strong insider trading would create superior results
Weak all data added in but fundamental analysis may produce superior results

26
Q

Anomalies- active

A

P/e effect
Small firm effect
Januarys effect
Neglected firm effect
Value line
Long weekend effect

27
Q

Active styles of investing

A

Fundamental analysis-looks at balance sheets in one statements, int rate GDP unemployment
Ratio analysis
Technical analysis- looks at charts or computer programs ex. Dow theory, Barton’s confidence index, mutual fund cash position, advance decline line, moving average 200 day, investment advisor opinions
Charting support floor resistance ceiling

28
Q

Dividend payment

A

Purchase date
Ex dividend date
Date of record

29
Q

Private placement regulation d

A

Offering can be sold to a max of 35 non accredited investors and unlimited accredited investors, given offering memorandum
Accredited investor ind with net worth of 1,000,000 income of 200,000 or joint income of 300,000 1,2,3 rule (home doesn’t count in NW)
NA investor must sign investment letter

Qualified purchaser is $5 mil in investments

30
Q

YMCA bond ladder

A

Discount
Y yield to call
M yield to maturity
C current yield (coupon/ bond market price)
A annual rate or coupon
C
M
Y
Premium

31
Q

Tips and I bonds

A

Both have a dual tax structure they have phantom income plus their interest payment

Basis is increased semiannually by inflation
Interest rate is fixed and interest payments vary as principal changes for inflation

I bonds have the option to defer paying tax tips do not

32
Q

Debenture and indenture

A

Debenture IOU, corporation debt obligation back by integrity of issuer
Indenture formal agreement, (deed of trust)

33
Q

Standard and Poor
Moodys
A.M. best (insurance company review)

A

Investment grade SP AAA, Aa, A, BBB
Moodys Aaa, Aa, A, Baa

Speculative grade sp BB and Below junk bonds
Moodys Ba and below junk bonds

Am best looks at historical date on insurance companies A++ to F

Inv Formulas (5 decks)

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