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144 Cards in this Set

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Full price of a bond
Full price = Clean price + Accrued interest
Duration
-%change bond price/%change bond yield
Value of Callable Bond
=Value of option free bond - Value of the call
TIPS coupon payment
=Inflation adjusted Par Value X (Stated coupon rate/2)
Absolute Yield spread
=Yield on bond with Higher yield - Yield on bond with lower yield
Relative Yield spread
=(Higher yield/Lower yield)-1
Yield Ratio
=Higher yield/lower yield
After-tax yield
=Taxable yield X (1-marginal tax rate)
Tax equivalent yield
=Tax free yield/(1-Marginal tax rate)
Bond equivalent yield
=[{(1+monthly CFY)^6}-1] X 2
Spot rate at time 3
[(1 + one year forward rate at time 0)(1 + one year forward rate at time 1)(1 + one year forward rate at time 2)^1/3] - 1
1 year forward rate at time 2

and

7 year forward rate at time 3
=[(Spot rate at time 3)^3 / (Spot rate at time 2)^2] - 1

and

={[(1 + 10 year spot rate)^10 / (1 + 3 year spot rate)^3]^1/7} - 1

=
Effective Duration
=(Bond price when yield falls - bond price when yield rise) / 2 X initial price X % change in yield as decimal
Percentage change in bond price
=-effective duration X % change in yield
Portfolio duration
=W1D1 X W2D2 X ... X WnDn
% change in bond price
=Duration effect + convexity effect = [(-duration x change in yield)+ (convexity X change in yield^2)] X 100
Price Value of basis point
=duration X .0001 X bond value

Note: if rates increase, bond value must fall. After calculation, use this information for come up with final answer
Value of long FRA at settlement
=notional principal X [(floating rate-forward rate)X(days to maturity/360) / (1 + floating rate)X(days to maturity/360)
Intrinsic value of Call and Put
Call = max[0, S-X]

Put = max[0, X-S]
Option value
=intrinsic value + time value
Lower/Upper bound European Call Option
Lower = Max[0, S - (X/(1+RFR)^T-t]

Upper = S
Lower/Upper bound American Call Option
Lower = Max[0, S - (X/(1+RFR)^T-t]

Upper = S
Lower/Upper bound European Put Option
Lower = Max[0,(X/(1+RFR)^T-t) - S]

Upper = (X/(1+RFR)^T-t)
Lower/Upper bound American Put Option
Lower = Max[0,(X - S)]

Upper = X
Put-Call Parity
c + (X/(1+RFR)^T) = S + p
Net fixed rate payment on fixed/floating swap
= (SWAP fixed rate - LIBOR) X (Days to maturity/360) X (Notional Principal)
WACC
=Wd[(Kd)(1-t) + WpsKps + WeKe
CAPM (Ke)
= RFR + B[(E(rm)-RFR]
Ke
=CAPM or D1/P0 + g or Bond yield + Risk premium
RFRreal
= [(1+RFRnominal)/(1+IP)]-1
After tax cost of debt
=Kd(1-t)
Cost of Preferred Stock (Kps)
=Dps/Pnet
Correlation
= Cov1,2/SD1 X SD2

Indicates strength and direction in which two random variables move together.
Total Risk
=Systematic Risk + Unsystematic Risk
Beta (B)
= Cov1,mkt/SDmkt^2
Equation for CML
=RFR + SDportfolio[(E(Rm)-RFR)/SDmarket]
Straight line depreciation
=Cost-Salvage/useful life
Double Declining Balance Depreciation
=(2/Useful life)(Cost-Accumulated depreciation)
Sum of Years Digits Depreciation
Depreciation in year X = (original cost-salvage value)(n-x+1)/SYD
Free Cash flow
=Operating Cashflow-Net Capital Expenditures
Common Size income statement ratios
=Income statement account/Sales
Common Size Balance Sheet ratios
=Balance Sheet account/Total Assets
Current Ratio
=Current Assets/Current Liabilities
Quick Ratio
=Current assets - inventories/Current Liabilities

or
=Cash + mkt. Securities + receivables / current liabilities
Cash ratio
=Cash + Mkt. Securities / current liabilities
Receivables Turnover
=Net annual sales / Average Receivables
Average Receivables collection period
=365 / Receivables turnover
Inventory Turnover
=Cogs / Avg. Inventory
Average inventory processing period
=365 / Inventory turnover
Payables turnover
=Cogs / Avg. payables
Payables Payment period
=365 / Payables turnover
Cash Conversion Cycle
=(Avg. Rec. collection period) + (Avg. Inventory processing period) - (Payables payment period)
Total Asset Turnover
=Net Sales / Avg. Total Assets
Fixed Asset Turnover
=Net Sales / Avg. Fixed Assets
Equity Turnover
=Net Sales / Avg. Equity
Gross Profit Margin
=Gross Profit / Net Sales
Operating Profit Margin
=Operating Profit / Net Sales

or

EBIT / Net Sales
Net Profit Margin
=Net Income / Net sales
Return on Total Capital
=Net Income + Interest Exp. / Avg. Total Capital
Return on Total Equity
=Net Income / Avg. Total Equity
Return on Common Equity
=Net Income - Preferred Dividends / Avg. Common equity
Business Risk
=SD of EBIT / Mean of EBIT

or

SD of Operating Income / Mean of operating income
Debt to Equity Ratio
=Total long term debt / Total Equity

or

Long term liabilities + Deferred Tax + PV of lease obligations / Common + Preferred Equity
Long Term Debt to Long Term Capital ratio
=Total Long Term debt / Total long term capital
Total Debt Ratio
=Current Liabilities + Long term debt / Total Debt + Total Equity
Interest Coverage AKA Times interest earned
=EBIT / interest expense
Fixed Financial Cost Ratio
=EBIT + ELIE / gross interest expense + ELIE
Cash flow coverage to fixed financial costs
=CFO + Interest expense + ELIE / Interest Expense + ELIE
Cash flow to long term debt
=CFO / BV long term debt + PV operating leases
Cash flow to total interest bearing debt
=CFO / Total long term debt + current interest bearing liabilities
Original DuPont
=Total Asset Turnover X Equity Multiplier X Net profit Margin

or

=Sales/Total Assets X Net Income/Sales X Assets/Equity
Extended DuPont (ROE)
=[(EBIT/Sales)(Sales/Assets)-(Int. Exp/Assets)](assets/equity)(1-t)
Basic EPS
=(Net Income - Preferred Dividend) / (Weighted Avg. # common shares outstanding)
Diluted EPS
=(Net Income - Pref Div)+(Conv. Pref. Div.)+(Conv. Debt int.)(1-t) / (Weighted Avg. # Common)+(Conv. Pref Shares)+(Conv. debt shares)+(shares issued for Stock Options)
Ending Inventory
=Begenning Inventory + Purchases - COGS
Current Cost of FIFO inventory
=LIFO inventory + LIFO Reserve
FIFO COGS
=LIFO COGS - (Ending LIFO Reserve - Beg. LIFO Reserve)
Average Age in years
=Accumulated Depreciation / Depreciation Expense
Average Age as % (Relative Age)
=Accumulated Depreciation / Ending Gross Investment
Average Depreciable Life
=Ending Gross investment / Depreciation Expense
Income Tax Expense
=Taxes Payable + (Change DTL - Change DTA)
Interest Expense
=(Market rate @ issuance) X (Balance Sheet Value of Liability at begenning of period)
Nominal Risk Free Rate
=Real Risk Free Rate + Expected inflation

or

=(1+RFRreal)X(1+inflation premium)-1
Required Rate of return on a security
=(Real Risk Free Rate + Expected inflation) + Default risk premium + Liquidity premium + Maturity Risk Premium

or

=[(1+RFR)(1+IP)(1+RP)]-1
EAR
=[(1 + Periodic Rate)^n] - 1
Continuous EAR
=(e^r)-1
PV of Perpetuity
=PMT / i
Future Value
=PV(1+i)^n
Bank Discount Yield
=(Face Value-Purchase Price/Face Value) X (360/t)
Holding Period Return (HPY)
=(P1 - P0 + D1) / P0
Effective Annual Yield (EAY)
=[(1+HPY)^(365/t)]-1
Money Market Yield
=(360+BDY) / [360-(t X BDY)]
Geometric Mean
=[(1+r1)(1+r2)...(1+rn)]^(1/n)
SemiVariance
=Sum of (X-Avg)^2 / (#obs below Avg - 1)
Coefficient of Variation
=SD of X / Mean of X
Sharpe Ratio
=Rportfolio - RFR / SDportfolio
Excess Kurtosis
=Sample kurtosis - 3
Harmonic Mean
= N / Sum(1/x)
Mean Absolute Deviation (MAD)
= Sum |(X-obs)| / n
Joint Probability P(AB)
=P(A|B) X P(B)
P(A or B)
=P(A) + P(B) - P(AB)
nCr
= n! / (n-r)! X r!
nPr
= n! / (n-r)!
90%, 95%, 99% Confidence Intervals
= 90% CI = -1.65<X<1.65

= 95% CI = -1.96<X<1.96

= 99% CI = -2.58<X<2.58
Z score
=Observation-population mean / Standard Deviation
SFRatio
=E(rp)-RFR / SDmarket
Continuous compounded Rate of Return
=ln(1+HPR)
Rate of inflation
=CPI this year - CPI last year / CPI last year
Potential deposit expansion multiplier
= 1 / Required reserve ratio
Potential increase in money supply
= Potential deposit expansion multiplier X Increase in excess reserves
Equation of Exchange
= Money Supply X Velocity = GDP = PRICE X Real Output
Price Elasticity of Demand
= % change in Qunatity Demanded / % change in Price
Income Elasticity
= % change in Quantity demanded / % change in income
Cost Minimizing condition
= [(MP of A)/Price A] = [(MP of B)/Price B] = [(MP of C)/Price C]
Interest rate parity
Forward(DC/FC) = Spot(DC/FC) X [(1+Rd)/(1+Rf)]
Annualized Forward discount or premium
=[(forward rate/spot rate)-1] X (360/t)
Balance of Payment equation
=Current Account + Financial Account + Reserve Account = 0
Relative PPP
=Expected future exchange rate = Spot Rate X [((1+inflation domestic)^t) / ((1+inflation foreign)^t)]
CF
=Net income + Depreciation + Amortization
Adjusted CFO
=CFO + [(net cash interest outflow)X(1-t)]
P/CF
=Market price per share / CF per share
P/BV
=Market price per share / BV per share
P/S
=Market price per share / Sales per share
Short interest ratio (SIR)
=Outstanding short interest / Avg daily volume on exchange

note: ratio high (6 or above), potential demand, bullish - ratio low (4 or below), potential for short sales. bearish sign.
Uptick/downtick
=# block uptick transactions / # block downtick transactions

note: Bullish if ratio close to .7. Bearish if ratio close to 1.1
Confidence Index (CI)
=Quality bond yield / average bond yields

note: Periods of confidence yield spreads narrow, CI GETS BIGGER - Periods of pessimism yield spreads widen, CI GETS SMALLER
Smart money technician ratios
Confidence index

Tbill-Eurodollar spread

Specialist short sales

Debit balances in brokerage accounts
Specialist short sales
=Short sales by specialists / Total short sales on NYSE

note: below 30% bullish - above 50% bearish
Mutual fund ratio
=Mutual fund cash / total fund assets

note: greater than 13%, funds holding cash and market is bearish, CONTRARY BULLISH - Vice versa if less than 5%
Contrarian technician ratios
Mutual fund ratio

Investor credit balances in brokerage accounts

Investment advisor opinions

OTC vs. NYSE volume

CBOE Put/call ratio

Stock index futures
Investment advisor ratio
=Bullish opinions / total opinions

note: Greater than 60%, mkt bearish, CONTRARIAN BULLISH - Less than 20%, mkt bullish, CONTRARIAN BEARISH
Volume ratio
=OTC volume / NYSE volume

note: Greater than 112%, speculation high, CONTRARIAN BEARISH - less than 87%, investors bearish, CONTRARIAN BULLISH
Put call ratio
=Puts/Calls

note: Greater than .5, mkt bearish, CONTRARIAN BULLISH - less than .35, mkt bullish, CONTRARIAN BEARISH
Expected growth rate (g)
=Retention rate X ROE

or

(1-dividend payout) X ROE
Preferred stock valuation
=Price at time 0 = Dps / Kps
One-period stock valuation
=Price at time 0 = [(D1 / Ke) + (P1 / Ke)]
Infinite Period Stock valuation
=Price at time 0 = D1 / (Ke - g)
Earnings Multiplier
=P/E = (D1/E) / (Ke - g)
Negative Skew
Tail points toward negative number/origin. If median is higher than mean, distribution is negatively skewed
Platykurtic
Distribution with negative excess kurtosis

Distribution is less peaked than normal distribution
Bid-Ask spread percentage
=(Ask-Bid / Ask) X 100
Things to consider in determining DTL treated as equity
1. Likelihood of reversal
2. Growth rate of entity
3. Time Value of money
Firms optimal Capital Structure
Ratio fo debt and comm0n/preferred equity that creates lowest possible WACC and maximizes the value of the firms stock
Financial leverage multiplier
=A/E