Calculations

Question 1

Interest Yield on Bonds

Answer 1

coupon or nominal yield/Clean Price x 100

Question 2

Redemption Yield on Bonds

(where the redemption yield is less than the interest yield there will be a capital loss if held to redemption

Answer 2

Gain or loss/number of years to maturity= /Clean price x 100

Interest yield - sum above = redemption yield

Question 3

Earnings per Share

Answer 3

Profit attributable to ordinary shareholders (after tax, minority interests, preference shares satisfied) / number of ordinary shares in issue

Question 4

Dividend Yield

Answer 4

Dividend per share/current share price x 100

Question 5

Dividend Cover

Answer 5

Individual = earnings per share/dividend per share

Total profit = profit attributable to ordinary share holders/Dividend paid to ordinary shareholders.

Question 6

Price earnings ratio (P/E)

Answer 6

Current market price of share/earnings per share

Question 7

Net asset value (NAV)

Answer 7

Net assets attributable to ordinary shareholders/number of ordinary shares in issue

Question 8

Rental yield

Answer 8

Gross rent x 12/market price x 100= yield

Question 9

CAPM ( Capital asset pricing ratio)

Answer 9

Rf + Bi (Rm-Rf) = E(Ri)

Rf - rate of return on a risk free asset
Rm - expected return of the market portfolio
Bi - the measure of sensitivity of the investment in the overall market
(Rm - Rf) market premium, the excess return of the market over the risk free rate
Bi (Rm-Rf) is the risk premium of the risky investment

Question 10

Compound Interest

Answer 10

PV (1 + r)n = RV

use Xy on calculator

Question 11

EAR

Answer 11

(1+r/n) power of n -1 (x 100 for rate)

Question 12

Present Value

Answer 12

FV (1+r)n

Question 13

Regular payment discounting

Answer 13

FV=P (1+R)n -1 = /r

Question 14

discounted cash flow

Answer 14

PV = FV/(1+r)n

Question 15

Annuity formula

Answer 15

A= p(1- (1+r)-n / r

Question 16

Holding period return

Answer 16

R = D + V(1) -V (0) / V(0)

Question 17

Money weighted rate of return

Answer 17

MWR = D = V (1) - V(0) - C / V(0) + (C x n/12)

Question 18

Time Weighted returns

Answer 18

TWR = V1/Vo x V2/(V1 +c) -1

Question 19

The Sharpe ratio

Answer 19

Return on investment - risk free return/standard deviation of the return on the investment

Question 20

Information ratio

Answer 20

Rp - Ro/tracking error

Question 21

Calculation Alpha - a

Answer 21

Rf - risk free rate of return
Rm is the market return
Bi is the beta of the fund

a = acutal portfolio return - (Rf + (bi x (Rm-Rf)