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AVERAGE
Arithmetic average mean rate of return
Average
• The average project earnings after taxes and depreciation divided by the average
book value of the investment during its life.
• Combined with price appreciation, the average dividend yield (if any) can show a
potential total return from a security investment. The formula for the average
dividend yield is:
(EPS *Average Payout) / current price
where EPS = Estimated Future High EPS / (1 + EPS Growth) 2.5
Companies that pay a dividend will generally increase the dividend as EPS grow.
Share price growth will usually follow the dividend increases, and thus keep dividend
yield at a constant percentage.
Average high pe
• The average high Price-Earnings Ratio (PE) for the past five years. Used to
calculate a predicted high price.
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Average life
• Also referred to as the weighted-average life (WAL). The average number of years
that each dollar of unpaid principal due on the mortgage remains outstanding.
Average life is computed as the weighted average time to the receipt of all future
cash flows, using as the weights the dollar amounts of the principal pay downs.
• The average low Price-Earnings Ratio (PE) for the past five years. Used to
calculate a predicted low price.
Average maturity
• Pre-tax Income divided by Sales. This measures how well management converts
sales dollars into profits after deducting all the operating expenses for making and
selling its products. Compare the last two years' pre-tax profit margins with the 5-
Average price
• The average of the annual high and low Price-Earning Ratios for a particular time
period, typically calculated over the last five years.
• Abbreviated ARR. The ratio of the average cash inflow to the amount invested.
• The most widely quoted and oldest measures of change in stock prices, tracking
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the prices of a group of stocks that represent Industrial, Transportation, and Utility
companies.
• This is the best known U.S. index of stocks. It contains 30 stocks that trade on the
New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of
the largest U.S. companies are performing. There are thousands of investment
Moving average
• Used in charts and technical analysis, the average of security or commodity prices
constructed in a period as short as a few days or as Long as several years and
showing trends for the latest interval. As each new variable is included in calculating
the average, the last variable of the series is deleted.
• The mean, calculated at any time over a past period of fixed length.
Weighted average
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• Abbreviated WACC. Reflects the expected average future cost of funds for the
upcoming year; found by weighting the cost of each specific type of capital by its
proportion in the firm's capital structure.
• Expected return on a portfolio of all the firm's securities. Used as a hurdle rate for
capital investment.
• The weighted average of the gross interest rate of the mortgages underlying the
pool as of the pool issue date, with the balance of each mortgage used as the
weighting factor.
• The WAM of a MBS is the weighted average of the remaining terms to maturity of
the mortgages underlying the collateral pool at the date of issue, using as the
weighting factor the balance of each of the mortgages as of the issue date.