FI 414 Study Guide - Midterm Guide: Call Option, Net Profit, Dividend Yield

• School: University of Alabama
• Department: FIN
• Course: FI 414
• Professor: Professor Mortal

Document Summary

Bids and asks: investor buys at ask & sells at bid. Ask is slightl(cid:455) highe(cid:396) to (cid:396)ep(cid:396)ese(cid:374)t the (cid:271)(cid:396)oke(cid:396)"s pay for providing quick & easy transaction. Expressed as %age of par (121. 41=121. 41% of par) Coupons also expressed as %age of par, but are annual not semi annual. Current yield = (cid:3041)(cid:3041)(cid:3048)(cid:3039) (cid:3042)(cid:3048)(cid:3043)(cid:3042)(cid:3041) (cid:3041)(cid:3042)(cid:3040)(cid:3032) (cid:3045)(cid:3032) (cid:1876)(cid:883)(cid:882)(cid:882) Rm = rt*(1-t) (muni rate = taxable rate (1-taxrate)) -- after tax yield = taxable rate*(1-tax rate) -- equivalent taxable yield = muni/(1-t) [find muni that gives you same yield as corporate w/ given tax rate] Corporate holdings of equity securities: (total before-tax income [cap gains and div])*30% = taxable income. Taxable income*tax rate = taxes taken, subtract from bti to get ati. : t-(cid:271)ills, cd"s, (cid:272)o(cid:373). pape(cid:396), (cid:271)(cid:396)oke(cid:396)"s (cid:272)alls, (cid:271)a(cid:374)ke(cid:396)s" acceptance, euro$, repos (short-term sale w/ promise to repurchase at higher price. Reverse rp is lending the money), reserves, federal funds. - bank discount: #(cid:3046) (cid:3047)(cid:3042) (cid:3047)(cid:3048)(cid:3045)(cid:3047) (cid:3046) (cid:3041) (cid:3032)(cid:3045)