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CWM 1 - Financial Markets > Chapter 5 - Risk and Returns > Flashcards

Chapter 5 - Risk and Returns Flashcards

1
Q

Real Rate of Interest

A

(1+nominal/1+inflation)-1

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2
Q

Periodic Yeild

A

(Current price-nominal)/Current Price

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3
Q

Annualised Yeild

A

Periodic Yield/(365/period to repayment)

Works out what you would earn over year. Works with bills and paper

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4
Q

Simple Yeild

A

Coupon/price

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5
Q

Real Yeild

A

Nominal-inflation

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6
Q

Index linked adjustment

A

Coupon=Coupon*(New RPI/Old RPI)

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7
Q

Future value

A

Present value * (1+R)n

FV=PV*1+Rn
PV=FV/1+Rn
1+Rn=FV/PV

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8
Q

Annuity (simple)

A

(Cashflow/1+R) + (Cashflow/1+R2) + (Cashflow/1+R3)

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9
Q

Annuity formula

A

Present Value=Cashflow/0.R*(1-(1/(1+Rn)))

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10
Q

Annuity formula Plus (bond value)

A

Present Value=Cashflow/0.R*(1-(1/(1+Rn)))+(CAP/1+Rn)

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11
Q

Irredeemables

A

PV=Coupon/(1+r)

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12
Q

Flat yield/Income yield/Simple yield

A

FY=(Coupon/Market Price)*100

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13
Q

GRY (Japanese Method)

A

FY+((Profit or Loss at redemption/remaining years)/Market Price)

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14
Q

Interpolation

A

Annuity formula plus (for a discount value higher and lower than the Japanese method approximates). Then calculate the spread between the two.

(Ans 1/spread)*percentage between spreads + discount.

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15
Q

GEY

A

Gross equivalent yield=(Net redemption yield/(0.8 or 0.6 or 0.55))*100

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16
Q

Geometric Mean

A

(1+r1+r1+r)-1 (Used to find CdV Performance)

17
Q

Macaulay Duration

A

(Present Value of Cash flow * time to cash flow)/Bonds price

Basically calculate the bonds price using annuity plus, the go pack an multiply each cash flow by the years to maturity and add them all up. Divide by bonds price.

Where present value of flows = Coupons*1+Rn’s
So 10/1.= 9.26 * 1 year = 9.26

18
Q

Modified Duration

A

Macaulay Duration/1+R

19
Q

Bid-to-Cover Ratio

A

Bids received/Bids accepted

CWM 1 - Financial Markets (6 decks)

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