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CFA > Mega Terms 3 > Flashcards

Mega Terms 3 Flashcards

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CFA flashcards
1
Q

Payback period

A

Full years until recovery + ((unrecovered cost at the beginning of the last year)/(cash flow during the last year))

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2
Q

Profitability Index

A

PV of future cash flows/CF0 = 1 + NPV/CF0

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3
Q

WACC

A

wd(kd(1-t)) + wps(kps) + wce(kce)

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4
Q

Cost of preferred stock

A

kps = Dps/P

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5
Q

Cost of Common Equity

A

kce = D1/Po + g

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6
Q

Cost of common equity beta vs. bond yield

A

Rf + B(E(Rm)-Rf) vs. current market yield on firm’s long term debt + risk premium

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7
Q

Breakpoint

A

amount of capital at which the component’s cost of capital changes/Weight of the component in the capital structure

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8
Q

Degree of operating leverage

A

Q(P-V)/Q(P-V)-F

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9
Q

Degree of Financial Leverage

A

EBIT/EBIT-I

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10
Q

Degree of total leverage

A

DOL x DFL

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11
Q

Unlevered asset beta

A

Bequity{1/(1+[(1-t)D/E])}

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12
Q

Breakeven quantity of sales

A

(fixed operating costs + fixed financing costs)/(price - variable cost per unit)

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13
Q

Operating Breakeven quantity of sales

A

Fixed operating costs/(price-variable cost per unit)

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14
Q

Operating Cycle

A

Average days of inventory + average days of receivables

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15
Q

Discount basis yield

A

((FV-P)/FV)*(360/days)

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16
Q

Money Market yield

A

(FV-P)/P (360/days)

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17
Q

Bond equivalent yield

A

(FV-Price)/P (365/days to maturity) = HPY (365/days)

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18
Q

Cost of trade credit

A

(1+(% discount/(1-% discount))^365/days past discount -1

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19
Q

Margin call price

A

P0((1-initial margin)/(1-maintenance margin))

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20
Q

Price-weighted index

A

Sum of stock prices/number of stocks in index adjust for splits

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21
Q

Market cap-weighted index

A

Sum(Pricetoday)(number of shares outstanding)/Sum(Pricebase year)(number of shares outstanding)) x base year index value

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22
Q

Preferred stock valuation model

A

Po = Dp/kp

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23
Q

One-period stock valuation model

A

Po = D1/(1+ke) + P1/(1+ke)

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24
Q

Infinite period model - constant growth model

A

Po = D1/ke-g = D0 x (1+g)/ke-g

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25
Q

Multistage model

A

Po = D1/(1+ke) + … + Dn+1/ke-gc + Pn/(1+ke)^n

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26
Q

Earnings Multiplier

A

Po/E1 = (D1/E1)/(k-g)

27
Q

Expected/sustainable Growth Rate

A

g = retention rate * ROE where retention rate = (1 - dividend payout)

28
Q

Trailing P/E

A

Market price per share/EPS over previous 12 months

29
Q

Leading P/E

A

Market price per share/forecast EPS over next 12 months

30
Q

P/B ratio

A

Market value of equity/book value of equity = Market price per share/book value per share

31
Q

Book value of equity

A

Common shareholder’s equity

32
Q

P/S ratio

A

Market value of equity/total sales

33
Q

P/CF ratio

A

market value of equity/cash flow = market price per share/cash flow per share

34
Q

EV

A

Market value of cs and ps + market value of debt - cash and short-term investments

35
Q

Price of annual coupon

A

coupon + principal/(1+YTM)^N

36
Q

ROE

A

Net Income/((BVt+ BVt-1)/2)

37
Q

no-arbitrage forward price

A

F0(T) = S0(1+Rf)^T

38
Q

Value of forward at time t

A

Vt(T) = St + PVt(cost) - PVt(benefit) - (F0(T)/((1+Rf)^T-t))

39
Q

Put-call parity

A

c + X/(1+Rf)^T = S + p or Call = Put + Stock - PV(X)

40
Q

Collateral yield

A

return on T-bills posted at margin

41
Q

Roll yield

A

Roll yield is the amount of return generated in the futures market after an investor rolls a short-term contract into a longer-term contract and profits from the convergence of the futures price toward a higher spot or cash price.

42
Q

Correlation of two stocks

A

p1,2 = Cov1,2/(stdev1*stdev2)

43
Q

Equation of the CML

A

E(Rp) = Rf + (E(Rm)-Rf)(stedevp/stdevM)

44
Q

Equation of Beta

A

B1 = Covi,mkt/stdev^2mkt = corri,mkt(stdevi/stdevmkt)

45
Q

CAPM

A

E(Ri) = Rf + Bi[E(Rmkt)-Rf}

46
Q

Sharpe ratio and M-squared

A

Excess return per unit of total risk

47
Q

Treynor Measure and Jensen’s Alpha

A

Excess return per unit of systematic risk

48
Q

Continuation pattern

A

Triangles, rectangles, pennants, flags

49
Q

Price-based indicators

A

Bollinger bands, Rate of change, RSI, Stochastic, MACD

50
Q

Covariance

A

E(Rt,1-R1)(Rt,2-R2)/n-1

51
Q

Country Risk Premium

A

(sovereign bond yield-tbond yield)*(stdev of developing country’s index/stdev of soverign bonds in US currency)

52
Q

Business Risk

A

Sales Risk + Operating Risk

53
Q

Beta

A

covim/stdev^2m

54
Q

Multi Stage Supernormal growth

A

Po = D1/(1+ke) + … + Dn+1/ke-gc + Pn/(1+ke)^n where Pn = Dn+1/(ke-gc)

55
Q

Loan to value ratio

A

Current mortgage account/current appraised value

56
Q

Modified Duration

A

the weighted average of the number of years until the bond is paid off/(1+YTM)

57
Q

Approximate change in bond price

A
  • modified duration * change in YTM
58
Q

Approximate modified/effective duration

A

(V_ - V+)/(2 * V0* change in YTM or Curve)

59
Q

Approximate/Effective convexity

A

(V_ + V+ - 2V0)/ ((change YTM or curve)^2 * V0)

60
Q

Change in Bond Price

A

-(annual modified duration)(change YTM) + (1 + Convexity)(change YTM)^2

61
Q

Put-call Forward parity

A

F0(T)/(1+Rf)^T + p0 = c0 + X/(1+Rf)^T

62
Q

Futures price for a commodity

A

Futures price = spot price (1 + risk-free rate) + storage costs - convenience yield

63
Q

Backwardation

A

convenience yield is high and futures prices are less than spot prices

CFA (3 decks)

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