Final

Question 1

Beta formula (when you see a question with correlation in it)

Answer 1

correlation x market risk / market risk

Question 2

Demand for inferior goods?

Answer 2

Falls as income rises, so negative income elasticity of demand

Question 3

ROE looks at?

Answer 3

Returned earned by ordinary shareholders

Question 4

Shares issued by spit capital investment trust?

Answer 4

Income/capital/preference

Question 5

Stamp duty on commission questions?

Answer 5

0.5% rounded to next £5

Question 6

Worried interest rates might rise in the future?

Answer 6

Sell a long gilt future (physically delivered)

Question 7

How to hedge against a fall in interest rates?

Answer 7

Go long short sterling futures - one contract hedges 500k

Question 7

Credit/default return formula?

Answer 7

Yield - (rates+spread)

Question 8

DAX / CAC 40 / Hang-seng

Answer 8

Arithmetic / market weighted

Question 9

FT30 is

Answer 9

Equally geometrically calculated

Question 10

DJ is

Answer 10

Price weighted arithmetic

Question 11

Debtors are the same as?

Answer 11

Receivables

Question 12

Creditors are the same as?

Answer 12

Payables

Question 13

Shareholders funds =

Answer 13

Assets + liabilities

Question 14

Capital employed =

Answer 14

Share capital + reserves + long-term liabilities or total assets - current liabilities

Question 15

ROCE =

Answer 15

OP/capital employed

Question 16

Value of convertible

Answer 16

Value of straight bond + (premium/1+q) x no. of shares

Question 17

Discount (1st)

Answer 17

100-x / 100

Question 18

Yield (2nd)

Answer 18

100-x/x

Question 19

Stock selection return

Answer 19

Timing - actual portfolio return

Question 20

Asset allocation return

Answer 20

Benchmark actual return - timing