# Secret sauce VS Testing strategy

only four days left. it is time to summerize some shortcuts for certain problems. I ll just post mine, and wish to share yours too. 1. for a problem like this. A stock priced at \$20 has an 80 percent probability of moving up and a 20 percent probability of moving down. If it moves up, it increases by a factor of 1.05. If it moves down, it decreases by a factor of 1/1.05. What is the expected stock price after two successive periods? I would just do expected growth rate for each period i = 1.05*0.8+0.95*0.2 then two year will be 20*i^2. 2. DDB depreciation, use calculater DEPR function can save you some time too. 3. data variance, as early chebychev posted. 4. I found AMORT function is very useful. but be aware, the interest and principle are all cumulated. 5. SWAP, always use beginning rate instead of ending rate. I fell twice on this one. 6. Harmonic average (whatever wrong spell) < geo average < mean 7. forward premium. already use in indirect quote, ANNUALIZED. 8. reinvestment risk --> shorter, lower --> less risk. VS lower coupon, Longer time --> higher interest risk. 9. portfolio , two R, and LLTTU. 10, Code of ethics, ERIIIC (out of order but it is someone’s name). … Well My weak spot is fixed income and ethics. anyone comfortable with that has any tips?

great thread. Can you share how to use the AMORT and DEPR function on the calculator? Thanks

The AMORT function on the HP12-C is not all that intuitive. To illustrate, let’s use it to find out what the interest and principal portion of the 17th payment is in a 30-year mortgage, and the remaining principal outstanding. Interest rate = 5% and principal = \$500,000. N=30, i = 5, PV = \$500,000, FV = \$0; calculate PMT = \$32,525.72. To answer our question, first we need to take care of the amortization from years 1 through 16. So we type “16” and “AMORT”. The answer (342,371) is the amount paid in interest over the 16 years. Now to isolate the portion of the 17th payment that is interest, type “1” and “AMORT”. The calculator is adding the 1 to the 16 that we already dealt with, so we’re focusing on the 17th year. The answer is \$16,098.02. Push X>Y to see that the amount going to principal is \$16,427.70. Note that the sum, \$16,098.02 + \$16,427.70, is equal to our payment amount of \$32,525.72, as it should be. Now push [RCL] [PV] to see that \$305,532.70 of the mortgage remains to be paid. You can confirm these amounts on a simple spreadsheet. Suppose after this exercise you want to return to some basic cash flow calculations on the mortgage. It is critical that before doing so you reset n to 30 and PV to 500,000, as the HP 12C will have taken the liberty of resetting these numbers in solving the above questions.

I’m so not learning new calc tricks 3 days before the exam. *information overload* nice thread, naivejoe. I’ll post up if I think of something.

Use T-bond rate of return not t-bill in WACC calculations!(the Qbank uses t-bill, but the cfai sample used t-bond)

For the TI calc for the amort schedule, enter the same period both times and it will give you the principle and int for just that period. What does EIIIRC stand for?

E: encourage others ~~~ R: Uphold rules I: integrity I: independent I: interest C: competency guys you know the rest, right?

NOIR - nominal ordinal interval ratio -rising strength of scales of measurement

wats LLTTU?

legal , L , time horizon, taxes, unique -investment policy statement constrainsts. whats the the second L?

liquidity?

yeh thats how i remember it aswell… a nice glass of Pinot NOIR…

also, business and industry cycle VS what to buy is very hard to remember. any tips?

Naivejor can you share with us how you use DEPR and AMORT function if you are using BA II? Thanks.

Naive, please help us with the AMORT function on TI Calc. I would not like to construct Interest payment schedules and balance book value calculations in that 90 second time frame and under sever stress. Appreciate your help!!

Dinesh Look at a Mortgage e.g. PV=-270, N=30, I/Y=5% Calculate PMT per year 17.56 is the payment per year. *All are 1000s but 1000 has been removed *** Now consider you want to know the balance after 2nd payment is complete, Total Principal paid, the amount of total interest you have paid *** At this point hit 2nd Amort P1=2 Enter Down P2=2 Enter Down Shows BAL= -261.69 Principal Balance left Down PRN=4.267 Down INT=13.297 That’s it. Try this with your Bond stuff as well.

wow, thanks cpk, you are a lifesaver… this was so quick and easy…

Also learn the Bond functions on your calc… They are a life saver as well. http://education.ti.com/guidebooks/financial/baiiplus/BAIIPLUSGuidebook_EN.pdf

Dsylexic Wrote: ------------------------------------------------------- > NOIR - nominal ordinal interval ratio -rising > strength of scales of measurement Dsylexic, just to confirm. are those accurate examples? Nominal - categories (such as gender or color of eyes) Ordinal - bond ratings (AAA, etc) Interval - Stock prices Ratio - sharpe ratio