Series 7 Formulas

Question 1

Current Yield (CY)

Answer 1

Annual interest ÷ Market value of bond

Question 2

Accrued Interest

Answer 2

(Days of accrued ÷ Days in year) × Annual interest

Corporates/Munis = 30 / 360 basis; T + 3 settlement
Treasuries             = Actual days / 365 day year; T + 1 settlement

Question 3

Conversion Ratio

Answer 3

Par value ÷ Conversion price
o Note: Set at the time a bond is issued. The conversion ratio and conversion price do not change, unless there is an anti-dilution covenant.

Question 4

Parity price of bond

Answer 4

Market value of stock × Conversion ratio

Question 5

Parity price of stock

Answer 5

Market value of bond ÷ Conversion ratio

Question 6

Tax equivalent yield

Answer 6

Tax free yield ÷ (100% - Tax bracket)

o Used to convert a tax-free yield into a taxable yield

Question 7

Tax-free equivalent yield

Answer 7

Taxable yield × (100% - Tax bracket)

o Used to convert a taxable yield into a tax-free yield

Question 8

Annual Accretion

Answer 8

Total discount from par ÷ Years to maturity

o Accretion is the amount the cost basis of a bond is adjusted upwards towards par each year

Question 9

POP (Public offering price)

Answer 9

Sales charge (SC) + Net asset value (NAV)

Question 10

Sales charge (SC)

Answer 10

(POP - NAV) ÷ POP

Question 11

POP

Answer 11

NAV ÷ (100% - SC)

Question 12

Maintenance market value for long account

Answer 12

DR ÷ .75

o Minimum LMV before a margin call

Question 13

Maintenance market value for short account

Answer 13

CR ÷ 1.3

o Maximum SMV (before a margin call)

Question 14

Dividend yield

Answer 14

Annual dividend ÷ Current market value of the stock