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88 Cards in this Set
- Front
- Back
Fisher Effect |
Nominal Interest Rate = Real interest rate + expected inflation rate |
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Required interest rate on a security |
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Effective annual rate |
(1+ periodic rate)^m -1 |
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Continuous compounding |
e^r -1 = EAR |
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Bank discount yield or Discount Basis Yield |
D/F x 360/t (Fv - price)/Fv x 360/t |
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HPY |
HPY = (P1-P0+D1)/P0 = (P1+D1/P0) -1 |
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EAY |
Effective Annual Yield = (1+HPY)^(365/t) -1 |
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MMY |
Money Market Yield = HPY(360/t) MMY = (Fv - price)/price x (360/t) |
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Geometric Mean Return |
1+Rg = n•sqrt((1+R1)•(1+R2)•..•(1+Rn)) |
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Harmonic Mean |
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Position of obs at a given percentile (y) |
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Population & Sample Variance |
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Coefficient of Variation |
Standard deviation/mean |
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Sharpe Ratio |
(Rp-Rf)/(st.dev.p) |
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Joint probability |
P(AB) = P(A/B) x P(B) |
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Addition Rule |
P(A or B) = P(A) + P(B) - P(AB) |
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Multiplication Rule |
P(A and B) = P(A) x P(B) |
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Covariance & Correlation |
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Portfolio Variance |
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Bayes Formula |
P(B/A) = P(B) x P(A/B) / P(A) |
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Binomial Probability |
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Standard Normal distribution reliability factors |
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Z (normal dist) |
Z= (observation - population mean)/standard deviation |
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Roys SF Ratio |
(E(Rp) - RL)/st.dev. RL = Threshhold level return |
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Continuosly compunded rate of return |
Ln(1+HPR) |
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Standard error |
(Standard dev or sample dev)/sqrt(n) |
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Confidence interval |
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Tests for population mean |
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Paired comparisons Test |
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Own price elasticity |
(% change in quantity demanded) / (% change in own price) |
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Income elasticity |
(% change in quantity demanded)/(% change in income) |
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Cross price elasticity |
(% change in quantity demanded)/(% change in price of related good) |
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GDP deflator |
(Nominal GDP in year t)/(value of year t output at base year prices)×100 |
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GDP |
GDP=C+I+G+(X-M) |
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Consumer Price Index |
(Cost of basket at current prices)/( cost of basket at base period prices) × 100 |
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Money Multiplier |
1/Reserve Requirement |
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Equation of Exchange |
Money Supply x Velocity = Price x Real Output MV=PY |
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Aggregate Demand |
(X-M) = (S-I) + (T-G) |
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Fiscal Multiplier |
1/(1-MPC(1-t)) MPC = Marginal Propensity to Consume |
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Real Exchange Rate |
RER= Nominal Exchange Rate x (CPIb/CPIp) CPIb = CPI base currency CPIp = CPI price currency |
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Receivables Turnover & Days of Sales Outstanding |
RT = annual sales/ average receivables DoSA = 365/RT |
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Inventory Turnover & Days of Inventory on Hand |
IT = COGS/ average inventory DoIOH= 365/IT |
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Payables Turnover & Number of days of Payables |
PT = Purchases/ average payablesNoDoP = 365/PT |
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Quick Ratio |
(Cash + marketable securities + receivables )/ (current liabilities) |
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Cash Conversion Cycle & Operating Cycle |
CCC = Days of Sales outstanding + Days of Inventory on hand - Number of Days of Payables OC = Days of Sales outstanding + Days of Inventory on hand |
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Interest Coverage |
EBIT/Interest Payments |
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Fixed charge coverage |
(EBIT + Lease Payments) / (Interest Payments + Lease Payments) |
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Free Cash Flow to the Firm |
FCFF = net income + noncash charges + (cash interest paid (1-t)) - fixed capital investment - working capital investment Net income + noncash charges - working capital investment = CFO |
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Free Cash Flow to Equity |
FCFE = cash flow from operations - fixed capital investment + net borrowing |
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Original & Extended Dupont |
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Basic EPS |
Basic EPS = (net income - preferred dividends) / (wheighted avg number of common shares outstanding) |
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Purchases |
Ending Inventory = Beginning Inventory + Purchases - COGS |
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LIFO to FIFO |
Inventory: LIFO Inv + LIFO Reserve COGS: LIFO COGS - delta(LIFO RESERVE) |
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DDB Depreciation |
(2/useful life)(cost - Ac. Depreciation) |
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Income Tax Expense |
ITE = Taxes Payable + delta(DTL) - delta(DTA) Taxes Payable = Taxable Income x Statutory Rate |
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Effective Tax Rate |
ETR = ITE/PTI ITE = Income Tax Expense PTI = Pre Income Tax |
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Profitability Index |
1+(PV of future Casf Flows/CF0) |
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Cost of Preferred stock |
Kps = Dps/P |
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Cost of Common Equity |
Kce = D1/P0 + g
Kce = Rf + Beta(Rm - Rf + country risk premium)
Kce = bond yield + risk premium |
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Unlevered Asset Beta & Project Beta |
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Degree of Operating Leverage |
Q(P-V) / (Q(P-V)-F) % change in EBIT / % change in sales |
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Degree of Financial Leverage |
EBIT / (EBIT - I) (Q(P-V)- F) / (Q(P-V)- F - I) % change in EPS / % change in EBIT |
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Degree of Total Leverage |
DOL x DFL % change in EPS / % change in sales |
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Bond Equivalent Yield |
BEY = (Fv - price)/price x (365/t)
BEY = HPY x (365/t)
BEY = 2(Effective semi-annual yield) |
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Cost of Trade Credit |
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CML |
Rp = Rf+ (Rm - Rf)(st.dev.p/st.dev.m) |
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Beta |
Beta = COVi,m / VARm = CORRi,m(st.dev.i/st.dev.m) Beta measures sistematic risk. |
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SML |
Same as CAPM Ri = Rf + Beta(Rm - Rf) Plots return (y axis) vs Beta (x axis) |
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Margin Call Price |
MCP = Po ((1-Initial Margin) / 1- Maintenance Margin)) Initial Margin is Equity % |
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Gordon constant growth model |
Po = D1/(Ke - g) Ke = req. Rate of return g = expected growth rate |
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Earnings multiplier |
EM = Po/E1= expected dividend payout ratio / (k - g) |
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Enterprise Value |
Market value of common & preffered stock + market value of debt - cash & short term investments
Or EBITA × EV Multiplier Market value of common stock = market cap |
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Bond Flat Price |
Full price - accrued interest |
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Forward & Spot Rates |
(1× S2)^2 = (1+S1)(1+1Y1Y) |
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Option Adjusted Spread |
OAS = Z-Spread - Option Value |
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Modified Duration |
Macaulay duration / (1+YTM) |
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Aprox % change in bond price |
-ModDur x deltaYTM |
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Aprox Modified Duration |
(V_-V+)/(2Vo•deltaYTM) |
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Approximate Convexity |
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Risk- free asset |
Risky asset + derivative |
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Value of Forward at time t |
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Option Value |
Intrinsic Value + time value |
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Put - Call Parity |
S = C - P + X(1+Rf)^T |
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Risk Neutral probability of an Up Move |
(1 + Rf - D)/(U-D) D = 1/U |
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Inventory Valuation IFRS & US GAAP |
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Impairment IFRS & USGAAP |
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Interest Rate Parity |
Forward/Spot = (1+ Interest Rate price currency)/(1+ Interest Rate base currency) |
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Approx price change given Duration & Convexity |
-Duration x delta(yield) + 1/2 x Convexity x delta(yield)^2 |