Calculation Q's Flashcards
Anil buys a corporate bond and pays a clean price of £113.60 for a £100 nominal value of stock paying 7% coupon. Assuming it has exactly four years to run to maturity and had an original term of eight years, the gross redemption yield will be:
Select one:
a. 3.17%.
b. 2.76%.
c. 2.69%.
d. 3.88%.
a. 3.17%.
Yield = 7/113.60 = 6.16%
GRY = 6.16 - ((13.6/4)/113.40) * 100 = 3.17%
An investor pays a clean price of £114.60 for £100 nominal value of stock with a 5.5% coupon. Assuming the stock has exactly four years to run until maturity, what will the gross redemption yield be?
Select one:
a. 1.61%.
b. 4.8%.
c. 3.19%.
d. 3.65%.
Yield = 5.5/114.60 = 4.8%
GRY = 4.8 - ((14.60/4)/114.60) * 100 = 1.61%
chapter reference 1C4B
Graham has a gilt where the clean price is £95, the coupon is 5% and the time to redemption is 10 years. This means that the:
Select one:
a. redemption yield is 5.26%.
b. running yield is 4.75%.
c. running yield is 5%.
d. redemption yield is 5.79%.
d. redemption yield is 5.79%
chapter reference 1C4B.
Erica has a buy-to-let property. The purchase price was £200,000 and associated costs of purchase were £30,000. The rental income is £800 per month with a 15% management fee. The headline gross yield is:
Select one:
a. 4.17%.
b. 3.55%.
c. 4.08%.
d. 4.8%.
d. 4.8%.
chapter reference 2B2
Headline gross yield = Gross rent / market price
= (£800 * 12) / 200,000
If we were calculating for all expenses:
Gross rent - expenses / market price + cost of buying
= ((£800 - 120) * 12) / (£200,000 + £30,000) * 100 = 3.55%
The following information is extracted from the balance sheet of a company: issued share capital £50m, reserves £120m, current assets £70m, fixed assets £200m, current liabilities £40m, long-term debt £60m. The nominal value of the shares is £1 each. What is the net asset value [NAV] per share?
Select one:
a. £5.80.
b. £1.
c. £4.60.
d. £3.40.
d. £3.40.
chapter reference 2A5E
Net assets = Total assets - Total liabilities
£270m - £100m = £170m
NAV per share = Net assets / shares outstanding
£170m / 50 m shares = £3.40 NAV per share
On 1 September 2015 Anna invested £15,000 in a fixed rate investment paying 4% for four years; on 1 September 2019 she reinvested the resultant sum for a further two years at a fixed rate of 5%. How much will she receive on 1 September 2021?
Select one:
a. £20,101.
b. £19,140.
c. £19,346.
d. £18,900.
c. £19,346.
FV = PV*(1+r) ^n
chapter reference 5A2
A bank account pays an interest rate of 3.6% per annum, compounded on a monthly basis. What will the annual equivalent rate be?
Select one:
a. 3.96%.
b. 3.62%.
c. 3.66%.
d. 3.72%.
c. 3.66%.
(1 + r/n) ^n - 1
chapter reference 5A3A
AER
AER = (1 + r/n) ^n - 1
Warren invested £8,000 into his unit trust six years ago and it is now worth £12,837. What average annual compound rate of return has he received on this investment?
Select one:
a. 9.92%.
b. 5.47%.
c. 8.2%.
d. 10.08%.
c. 8.2%.
Square root to the power of (FV/PV) - 1
chapter reference 5A2
Average annual compount rate
Square root to the power of (FV/PV) - 1
James invested £6,000 into his unit trust seven years ago and it is now worth £9,954. What average annual compound rate of return has he received on this investment?
Select one:
a. 9.4%.
b. 13.5%.
c. 6.5%.
d. 7.5%.
d. 7.5%.
Square root to the power of (FV/PV) - 1
chapter reference 5A2
On 1 July 2016 Henry invested £20,000 in a fixed rate investment paying 3% for four years. On 1 July 2020 he reinvests the resultant sum for a further three years at a fixed rate of 5%. How much will he receive on 1 July 2023?
Select one:
a. £24,597.
b. £25,760.
c. £28,142.
d. £26,058.
d. £26,058.
FV = PV*(1+r) ^n
A bank account pays an interest rate of 5% per annum, compounded on a quarterly basis. What will the annual equivalent rate be?
Select one:
a. 5.12%.
b. 5.25%.
c. 5.09%.
d. 4.91%.
c. 5.09%.
(1 + r/n) ^n - 1
chapter reference 5A3A
On 1 November 2016 Sally invested £10,000 in a fixed rate investment paying 4% for three years; on 1 November 2019 she reinvested the resultant sum for a further four years at a fixed rate of 6%. How much will she receive on 1 November 2023?
Select one:
a. £15,306.
b. £14,201.
c. £13,933.
d. £23,874.
b. £14,201.
FV = PV*(1+r) ^n
chapter reference 5A2
Henry’s bank is offering a fixed rate deposit of 4% over seven years. How much will he need to invest on day one to accumulate exactly £5,000 at the end of the fixed term?
Select one:
a. £3,799.59.
b. £3,906.25.
c. £3,600.
d. £3,951.57.
a. £3,799.59.
PV = FV / (1 + r) ^n
PV
PV = FV / (1 + r) ^n
A building society account pays an interest rate of 4.5% per annum, compounded on a monthly basis. What will the annual equivalent rate be?
Select one:
a. 4.61%.
b. 4.55%.
c. 4.59%.
d. 4.57%.
c. 4.59%.
(1 + r/n) ^n - 1
chapter reference 5A3A
Jim has a structured product that pays 145% of the amount invested at the end of 5 years. What is the AER?
Select one:
a. 9.54%.
b. 7%.
c. 8.83%.
d. 7.71%.
d. 7.71%.
Square root of the FV/PV - 1
chapter reference 5A2/5A3A
A sum of £2,000 invested over 5 years with an interest rate of 5% compound would be worth how much at the end of the term?
Select one:
a. £2,680.19.
b. £2,552.56.
c. £2,500.
d. £3,000.
b. £2,552.56.
chapter reference 5A2
What is the effective annual rate of interest, where the nominal rate is 10% and interest is calculated daily?
Select one:
a. 10.47%.
b. 10.52%.
c. 10%.
d. 10.25%.
b. 10.52%.
(1 + r/n) ^n - 1
(1 + 0.10 / 365) ^ 365 - 1
chapter reference 5A3
In time value of money calculations, where the present value is £20,000, the interest rate is 8.2% and the time frame for investment is 10 years, ‘n’ is:
Select one:
a. £20,000.
b. 8.2%.
c. 0.082.
d. 10.
d. 10.
chapter reference 5A1
In time value of money calculations, where the present value is £10,000, the interest rate is 5.5% and the time frame for investment is 8 years, ‘r’ is:
Select one:
a. 5.5%.
b. 8.
c. 0.055.
d. £10,000.
c. 0.055.
chapter reference 5A1
What is the APR on a loan where interest is charged at the rate of 24% a year on a monthly basis?
Select one:
a. 26.82%.
b. 48.02%.
c. 24.94%.
d. 12.47%.
AER = (1 + r/n) ^n - 1
If £100 is invested at the end of each year at an interest rate of 8% a year for 10 years, what will be the accumulated or future value at the end of 10 years?
Select one:
a. £1,627.39.
b. £1,448.66.
c. £1,564.55.
d. £1,600.
b. £1,448.66.
FV = P ( ( 1 + r ) ^n - 1) / r ))
chapter reference 5A4A
FV with regular payment
FV = P ( ( 1 + r ) ^n - 1) / r ))
If the nominal rate of return on an investment is 6% and inflation is 3%, what is the approximate real rate of return?
Select one:
a. 4.5%.
b. 4%.
c. 3.5%.
d. 3%.
d. 3%.
chapter reference 5B
Madge has a 3 year loan with an annual interest rate of 23% payable on a monthly basis. What is the APR?
Select one:
a. 25.85%.
b. 25.59%.
c. 24.81%.
d. 30.75%.
b. 25.59%.
chapter reference 5A3A
GRY
Interest yield + - * (gain (or loss) / number of years to maturity) / (clean price) * 100
