formulas practical

Question 1

money supply

Answer 1

M = C + D

Question 2

Currency deposit ratio

Answer 2

c = C / D

Question 3

excess reserve ration

Answer 3

e = ER / D

Question 4

Money multiplier

Answer 4

m = (1 + c ) / (rr + e + c)

Question 5

rr

Answer 5

required reserve

Question 6

simple deposit multiplier

Answer 6

D = ( 1 / rr ) x R

Question 7

money base

Answer 7

MB = C + R

Question 8

effect of money multiplier

Answer 8

M = m x MB

Question 9

future value of a cash flow

Answer 9

FVn = Co ( 1+ r )^n

Question 10

present value of a cash flow

Answer 10

PVo = Cn / (1 + r )^n

Question 11

PV perptuity

Answer 11

= C / r

C= size  of periodic payment 
r =  intrest rate

Question 12

PV annuity

Answer 12

= C/r x (1 - ( 1 / ( 1 + r)^n )))

Question 13

FV annuity

Answer 13

= C / r x ( (1 + r)^n -1 )

Question 14

coupon payment

Answer 14

CPN = (coupon rate x Face Value) / number of coupons per year

Question 15

stock bonus

Answer 15

= number of shares x price per share

Question 16

price of a security = PV all future payments

-> price o bond when it was used

Answer 16

PV = (C / r) x (1 - (1 / (1 + r)^n) ) + F / (1 + r)^n

Question 17

price of a security = PV all future payments

-> price bond immidiately before it makes its first coupon payment

Answer 17

PV = PMT + (C / r) x (1 - (1 / (1 + r)^n) ) + F / (1 + r)^n

Question 18

nominal intrest rate

Answer 18

= real intrest rate + inflation rate

Question 19

expected return

Answer 19

E (R) = Pr x R

Question 20

yield to maturity of an n-year zero-coupon bond

Answer 20

YTMn = (FVn / P )^(1/n) - 1

Question 21

forward intrest rate for year n (*)

Answer 21

fn= ( (1 + YTMn)^n / (1 + YTMn-1 )^(n-1) ) -1

Question 22

series of one-years interst rate over the next years

on the yield curve

Answer 22

int = ( it + it+1^e + it+2^e + … +(it+(n-1)) ^e ) / n

Question 23

dividend discount model (DDM)

Answer 23

Po = (DIV + P1 ) / ( 1 + rE)

Question 24

equity cost of capital

Answer 24

rE = DIV1 /Po + (P1 - Po) / Po

= divident yield + capital gain rate

Question 25

effertice periodic rate

Answer 25

= ( 1 + annual rate)^(1/n periods) - 1

Question 26

constant dividend growth model

Answer 26

Po = DIV1 / (rE - g)

-> rE = Div1/Po + g = divident yield + g

Question 27

duration analysis

Answer 27

procentage change in market value of security =

- (procentage point change in intrest rate) x duration in years

Question 28

net worth

Answer 28

= total asset - total liability

Question 29

gap analysis

Answer 29

change in bank profit =

(rate sensitive asset - rate sensitive liability) x change in intrest rate

Question 30

leverage ratio

Answer 30

= bank capital / total assets

-> should exceed 5%

Question 31

Risk weighted capital ratio

Answer 31

= bank capital / risk weighted assed

Question 32

to calculate the “interest on interest”

Answer 32

FV= ( PV ( 1 + i )^n ) - ( PV ( 1 + n i ) )

Question 33

cash flow immidiately before payment

Answer 33

PV = PV perpetuity + Co