CFP Investments

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CFP Investments
2012-04-12 10:04:23

Important Notes to study for American College Investments for Financial Planning course
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  1. Buying Power while on Margin
  2. Margin Maintenance
  3. M1
    All Cash and Coin in circulation, plus demand checking
  4. M2
    M1 + Money Market funds, savings accounts, and other short-time-period deposits
  5. Bank Discount Yield (BDY)
  6. Bond Equivalent Yield (BEY)
  7. Present Value of a Bond (Pricing a Bond)
    • YTM = Yield To Maturity = Discount Rate
  8. Current Yield of a Bond
  9. Duration of a Bond
    • T = Term To Maturity
  10. Modified Duration of a Bond
  11. How to estimate change in price for a bond
  12. Expectation for interest rates in the future
    • The term's rate = the geometric return of all future one-year terms.
  13. Black-Scholes Model for Calls
    • Increase with Time to Maturity
    • Increase with Interest Rate
    • Increase with Stock Price
    • Increase with Stock Volatility
    • Decrease with Higher Strike Price
  14. Put/Call Parity
  15. Conversion Ratio for Convertible Bonds
    • Converstion Ratio also known as Exchange Ratio
  16. Futures Hedging: Short Hedge
    You own the commodity, don't want prices to decline. Buy option, will deliver product on spot market, close out contract. For mortgage, since price of mtg can decline if rates rise.
  17. Futures Hedging: Long Hedge
    Intending to Buy the commodity later, worried prices will rise. Buy spot price later, settle contract. For bonds: if interest rates fall, current prices rise.
  18. Conversion Premium for Convertible Bonds