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IMC Unit 2 > General > Flashcards

General Flashcards

1
Q

What does an adjustment spread running high -> low mean for how the adjustment is applied?

A

Subtract the adjustment

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2
Q

Which account represents a countries investment position?

A

Capital account

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3
Q

Which account represents a countries imports and exports?

A

Current account

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4
Q

Which is generally higher: inflation or interest rates?

A

Interest rates

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5
Q

What is the calculation for nil-paid price?

A

Ex-rights price - subscription price

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6
Q

What is the numerator for ROCE?

A

PBIT

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7
Q

What factors are used to calculate goodwill?

A

Fair value and net asset requirements

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8
Q

In perfect competition, what three factors equal eachother?

A

Profit maximisation = marginal cost = marginal revenue

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9
Q

What kind of index is DJIA?

A

Unweighted arithmetic index

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10
Q

What kind of index is the FTSE 250?

A

Weighted arithmetic

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11
Q

How do you calculate the time value of an option?

A

Premium - intrinsic value

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12
Q

How do you calculate the intrinsic value of a put?

A

Strike price - underlying

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13
Q

What are fixed charge debentures secured against?

A

Named assets of the company

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14
Q

Does an OEIC have a singe or double price?

A

Single

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15
Q

Who supervises the management of an OEIC?

A

Depositary

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16
Q

True/false: the writer of the option receives the premium?

A

True

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17
Q

Credit derivatives are based on what?

A

A reference asset

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18
Q

What is the minimum number of holdings for a REIT?

A

3

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19
Q

What 3 factors will make a bond more sensitive to interest rates?

A

Low coupon
Longer time to maturity
Low yield

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20
Q

How do you calculate the flat yield?

A

Coupon / price

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21
Q

How do you calculate the premium value of a warrant?

A

Warrant price - formula value

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22
Q

What percentage is stamp duty?

A

0.5%

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23
Q

What are the 4 services of a stockbroker/private client fund?

A
  1. Execution only
  2. Advisory dealing
  3. Portfolio advisory
  4. Portfolio discretionary
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24
Q

CDS and total return swaps are examples of what kind of credit derivative?

A

Unfunded

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25
Q

Credit linked notes and synthetic CDOs are examples of what kind of credit derivative?

A

Funded

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26
Q

How do you calculate the correlation coefficient?

A

Covariance / SDx * SDy

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27
Q

What are the four types of qualification an auditor can make on a company’s accounts?

A
  1. Fundamental uncertainty
  2. Material uncertainty
  3. Fundamental disagreement
  4. Material disagreement
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28
Q

What is the indexation lag for index-linked gilts issued after June 2005?

A

3 months

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29
Q

How do you calculate the new period rebase value?

A

(New period B value / Old period B value) x Old period A value

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30
Q

When you have more than one median, what type of mean do you use?

A

Arithmetic

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31
Q

What is the point of profit in a monopoly?

A

Marginal revenue = marginal costs

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32
Q

How do you calculate the price of an undated bond?

A

(Par value x coupon payment) / required yield

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33
Q

How does the demand curve look in perfect competition?

A

Horizontal

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34
Q

At what level of ownership does an entity get reported as a subsidiary?

A

More than 50%

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35
Q

At what level of ownership is an entity an associate company?

A

20-50%

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36
Q

At what level of ownership is an entity treated as an investment?

A

Less than 20%

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37
Q

How do you calculate Macaulay duration?

A

(Sum of PV cash flows x time to cash flows) / sum of PV cash flows

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38
Q

What is the multiplier?

A

1/MPS

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39
Q

What do you call it when the basis of a future is positive?

A

Backwardation

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40
Q

What do you call it when the basis of a future is negative?

A

Contango

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41
Q

How do you calculate the information ratio?

A

(Fund return - benchmark) / standard deviation

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42
Q

What M-number is the total notes in circulation called?

A

M0/M1

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43
Q

What M-number are longer term deposits and money market funds called?

A

M3

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44
Q

What M-number is money held by non-bank private sector?

A

M4

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45
Q

What is another term for M0?

A

Narrow money

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46
Q

What does the Y axis represent in the Phillips curve?

A

Inflation

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47
Q

What does the X axis represent in the Phillips curve?

A

Unemployment

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48
Q

What does the long-run Phillips curve look like?

A

Vertical

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49
Q

What is the shape of the short-term Phillips curve?

A

Downward sloping

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50
Q

What is unemployment due to high real wages known as?

A

Classical unemployment

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51
Q

How many strike prices are there in a straddle?

A

One

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52
Q

How many strike prices are there in a strangle?

A

Two

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53
Q

What aspects of an index linked gilt are linked to RPI?

A

The coupons and the principle

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54
Q

How do you calculate warrant value?

A

Formula value + premium value

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55
Q

What is another term for formula value when describing a warrant?

A

Intrinsic value

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56
Q

What is another term for premium value when describing a warrant?

A

Time value

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57
Q

How do you calculate the percent premium for a warrant?

A

(Warrant price - formula value) / (number of shares created x share price)

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58
Q

How do you calculate the price of a warrant?

A

(Value of equivalent Am. call option x no. Shares created) / (no. Shares in issue if warrant exercised / no of current shares)

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59
Q

What is another term for the buyer of an option?

A

The holder

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60
Q

What is another term for the seller of an option?

A

The writer

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61
Q

What is another term for Monte Carlo modelling?

A

Stochastic modelling

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62
Q

What does a government do to address a current account deficit?

A

Reduce the value of the currency

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63
Q

How do you define GDP?

A

All production with the borders of a country

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64
Q

How do you define GNP?

A

All production by a country, anywhere in the world

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65
Q

What is the equation for the money supply equilibrium?

A

G+X+I = t+M+S

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66
Q

How do you calculate aggregate demand?

A

C+I+G+(X-M)

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67
Q

How do you calculate consumption?

A

a+bYD

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68
Q

How do you calculate the multiplier for a closed economy with no government?

A

1/(1-MPC)

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69
Q

How do you calculate the multiplier for a closed economy with a government?

A

1/(1-MPC(1-t)

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70
Q

How do you calculate the multiplier for an open economy with a government?

A

1/((1-MPC(1-t)+MPM))

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71
Q

How do you calculate the money multiplier?

A

1/reserve requirement

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72
Q

What is the quantity theory of money?

A

MV = PT

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73
Q

What does the X axis of the Phillips curve signify?

A

Unemployment

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74
Q

What does the Y axis of the Phillips curve signify?

A

Inflation

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75
Q

Are intangible assets amortised or depreciated?

A

Amortised

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76
Q

Are tangible assets amortised or depreciated?

A

Depreciated

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77
Q

How is inventory valued?

A

Lower of cost or net realisable value

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78
Q

Where are contingent liabilities disclosed?

A

In a note

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79
Q

How do you calculate straight line depreciation?

A

(Cost - residual value) / useful life

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80
Q

How do you calculate reducing balance depreciation?

A

1 - (nth root of (expected residual value / original cost))

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81
Q

Which cost flow assumption is not used in IFRS?

A

LIFO

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82
Q

What item does the income statement start with?

A

Sales revenue

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83
Q

Which item does the income statement end with?

A

Net profit

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84
Q

What is the starting point for the indirect method of recording cash flow?

A

Operating profit

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85
Q

What 4 changes do you make to net income to get FCFF?

A

+ non-cash charges
- investment in fixed capital
- investment in working capital
+ net interest payments

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86
Q

What 2 changes need to be made to FCFF to get FCFE?

A
  • net interest
    + net borrowing
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87
Q

What adjustment do you make to cash flow if depreciation charges increase?

A

Add cash flow

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88
Q

What adjustment do you make to cash flow if receivables increase?

A

Subtract from cash flow

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89
Q

What adjustment do you make to cash flow if payables increase?

A

Add to cash flow

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90
Q

What adjustment do you make to cash flow if investors increases?

A

Subtract from cash flow

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91
Q

What turnover threshold makes a company a small company?

A

£10.2m

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92
Q

What balance sheet threshold makes a company a small company?

A

£5.1m

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93
Q

How do you calculate the forward rate adjustment?

A

Add the adjustment to the spot rate

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94
Q

What is the Fisher equation?

A

F/S = (1+iVAR)/(1+iBASE) = (1+rVAR)/(1+rBASE)

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95
Q

What is the typical length of a bill?

A

Less than 1 year

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96
Q

What is the length of a typical bond?

A

More than 1 year

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97
Q

How often is a coupon paid for a gilt?

A

Semi-annually

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98
Q

What is the settlement time for UK gilts?

A

T+1

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99
Q

What is the typical length of time for a medium conventional gilt?

A

5-15 years

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100
Q

What is another name for an irredeemable bond?

A

Undated

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101
Q

How do you calculate the number of strips on a gilt?

A

(Number of years of the bond * 2) + 1

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102
Q

Which 3 entities can create a strippable bond?

A

GEMMS
Bank of England
Treasury

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103
Q

How do you calculate the repo rate?

A

Sale price - purchase price

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104
Q

What is the order of seniority of creditors? (6)

A

Liquidator
Fixed charge holders
Preferential creditors (employees)
Floating charge holders
Unsecured creditors
Subordinated loan stock

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105
Q

What is the order or seniority of owners? (4)

A

Preference shareholders
Ordinary shareholder
Deferred shareholders
Warrants

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106
Q

Where does mezzanine capital sit in the seniority?

A

Between creditors and owners

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107
Q

Where do floating rate notes trade compared to par?

A

Near par

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108
Q

Callable bonds can be redeemed early by whom?

A

Issuer

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109
Q

Potable bonds can be redeemed early by whom?

A

Holder

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110
Q

How do you calculate the conversion premium?

A

(Price of bond / potential number of shares) - current share price

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111
Q

How do you calculate the conversion value?

A

Market price * conversion ratio

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112
Q

How do you calculate the conversion price?

A

Par value / conversion ratio

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113
Q

What is the duration of a zero coupon bond?

A

Time to maturity

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114
Q

How do you calculate a market weighted index?

A

(Price today * no. of shares) / (base price * no. of shares)

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115
Q

What are the three non-market weighted indices?

A

DJIA
Nikkei 225
FT30

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116
Q

How do you calculate the rebasing of an index?

A

(New B / Old B) * Old A

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117
Q

How do you calculate the EBITDA multiple?

A

EV / EBITDA

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118
Q

How do you calculate the dividend cover?

A

EPS / dividend per share

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119
Q

How do you calculate the dividend yield?

A

Dividends per share / market price per share

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120
Q

How do you calculate the debt to equity ratio?

A

Total debt / total equity

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121
Q

How do you calculate the operational gearing ratio?

A

(Sales revenue - variable costs) / trading profit

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122
Q

How do you calculate the current ratio?

A

Current assets / current liabilities

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123
Q

How do you calculate the quick ratio?

A

(Current assets - inventory) / current liabilities

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124
Q

How do you calculate ROCE?

A

(Operating profit / capital employed) * 100

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125
Q

How do you calculate capital employed?

A

Total assets - current liabilities

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126
Q

What is weak form market efficiency?

A

Market prices reflect information of historical share price

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127
Q

What is semi-strong form market efficiency?

A

Market prices reflect information of historical share price + publicly available information

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128
Q

What is strong-form market efficiency?

A

Market prices reflect information of historical share price + publicly available information + private information

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129
Q

How do you calculate holding period return?

A

(End value / start value) - 1

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130
Q

How do you calculate the time-weighted rate of return?

A

(Multiply each holding period together) -1

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131
Q

How do you calculate the money-weighted rate of return?

A

PV calculate using timeline

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132
Q

How do you calculate CAPM?

A

ER = RF + beta(RM-RF)

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133
Q

How do you calculate Jensen’s Alpha?

A

Return - CAPM

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134
Q

How do you calculate the Sharpe Ratio?

A

(Mean portfolio return - risk free return) / SD portfolio return

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135
Q

How do you calculate the Traynor ratio?

A

(Portfolio return - risk free rate return) / beta

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136
Q

How do you calculate the information ratio?

A

(Portfolio return - benchmark rate) / SD of excess returns

137
Q

How do you calculate total risk?

A

Square root(variable M + variable S)

138
Q

How do you calculate variance?

A

SD^2

139
Q

How do you calculate beta?

A

Covariance(x,y) / variance of market return

140
Q

What is the replacement for beta in bond calculations?

A

Duration

141
Q

What is an alternative name for an OEIC?

A

ICVC

142
Q

What tax do unit trusts pay?

A

20%

143
Q

How do you calculate the unit value?

A

NAV / number of units

144
Q

What is the maximum amount a UCITS can have deposited with a single institution?

A

20%

145
Q

What is the maximum amount a UCITS can have invested in a single issuer?

A

5% (10% for up to 4 companies)

146
Q

What is the maximum amount a UCITS can have invested in another CIS?

A

20%

147
Q

What is the maximum amount a UCITS can have invested in a single government issuer?

A

35%

148
Q

What is the maximum amount a UCITS can have invested in a single issue of government securities?

A

30%

149
Q

What is the maximum amount a UCITS can own in a single company?

A

10%

150
Q

What is the maximum amount a UCITS can own in a single CIS?

A

25%

151
Q

What are the two types of Investment Trust Companies?

A

Conventional
Split Capital

152
Q

What are the three share classes in a split capital Investment Trust Company?

A

Zero dividend
Income share
Capital share

153
Q

Is an ETF subject to stamp duty?

A

No

154
Q

What proportion of profits must be distributed by a REIT?

A

90%

155
Q

What is the calculate for rental yield?

A

(Gross rent - expenses) / (property cost + buying costs)

156
Q

Where are futures traded?

A

On an exchange

157
Q

What level of profit is possible for a long future?

A

Unlimited

158
Q

What level of profit is possible for a short future?

A

The price agreed

159
Q

What is the maximum loss possible for a long future?

A

The price agreed

160
Q

What is the maximum loss possible for a short future?

A

Unlimited

161
Q

How do you calculate the fair value of a future?

A

The cash price of the underlying + cost of carry

162
Q

How do you calculate the basis of a future?

A

Cash price - futures price

163
Q

How do you calculate the number of futures required to hedge a position?

A

Value of long position / number of points x price per point

164
Q

What is the maximum loss for a long option?

A

The premium

165
Q

What is the maximum loss for a short option?

A

Unlimited

166
Q

What defines a European style option?

A

The right to exercise on the expiry date only

167
Q

What defines an American style option?

A

The right to exercise up to and including the expiry date

168
Q

How do you calculate the break even point?

A

The strike price - premium

169
Q

How do you calculate the premium of an option?

A

Intrinsic value + time value

170
Q

What does delta stand for?

A

Underlying price

171
Q

What does theta stand for?

A

Remaining life

172
Q

What does vega stand for?

A

Volatility

173
Q

What does rho stand for?

A

Interest rates

174
Q

How do you calculate the delta of an option?

A

Change in value of option price / change in value of underlying

175
Q

What is the scaling factor of a long gilt future?

A

1000

176
Q

What are the increments of a long gilt future?

A

1p

177
Q

What are the increments of a FTSE 100 future?

A

£10

178
Q

What is the tick size of a FTSE 100 future?

A

0.5 points

179
Q

What is the delivery cadence of FTSE 100 futures?

A

Quarterly (March, June, September, December)

180
Q

What is the tick size of STIR?

A

1 basis point

181
Q

What is the tick value of STIR?

A

£12.50

182
Q

What is the definition of initial margin?

A

Good faith deposit based on worst probably daily move

183
Q

What is the definition of variable margin?

A

Daily receipts and payment for unrealised profits and losses

184
Q

How do you calculate the flat yield of a bond?

A

(Gross annual coupon / market price)

185
Q

How do you calculate the gross redemption yield?

A

£coupon x 1/r (1-1/(1+r)^n) + CAP/(1+r)^n

186
Q

How do you calculate the net redemption yield?

A

(£coupon * (1-t)) x 1/r (1-1/(1+r)^n) + CAP / (1+r)^n

187
Q

How do you calculate the dirty price?

A

Clean price + accrued interest

188
Q

What is another term for settlement price?

A

Dirty price

189
Q

How do you calculate the Macaulay duration?

A

(Sum of (PV cash flows x time to cash flow) / sum of present value of cash flow

190
Q

How do you calculate the ex-scrip price?

A

Current price / sum of numbers in scrip ratio

191
Q

How do you calculate the ex-split price?

A

Market price / number of shares

192
Q

How do you calculate the value of a perpetuity?

A

Cash flow / interest rate

193
Q

How do you calculate the annual percentage rate (APR)?

A

(1+period rate)^n-1

194
Q

What is the definition of a deferred share?

A

An ordinary share that has no rights until a pre-determined event has occurred?

195
Q

How do you calculate total return?

A

((End value - beginning value) + dividends received) / beginning value

196
Q

How do you calculate Gordon’s growth model?

A

D0 * (1+g) / (r-g)

197
Q

How do you calculate the growth rate?

A

Retention ratio x return on equity

198
Q

How do you calculate the retention ratio?

A

(Earnings - dividends) / earnings

199
Q

How do you calculate return on equity?

A

Earnings / shareholder funds

200
Q

How do you calculate the percent premium of a warrant?

A

(Warrant price - formula value) / market value of shares

201
Q

What are the two other terms for a scrip issue?

A

Bonus issue, capitalisation issue

202
Q

What type of index is the Nikkei 225?

A

Price-weighted

203
Q

What date did the reference rate for RPI change?

A

June 2005

204
Q

What is the RPI reference date after the change?

A

3 months

205
Q

What was the RPI reference rate before the change?

A

Eight months

206
Q

How do you calculate the retention ratio?

A

(Net income - dividends) / net income

207
Q

How do you calculate the earnings growth rate?

A

Retention ratio x RoE

208
Q

How do you calculate RoE?

A

Net income / shareholder funds

209
Q

What is the definition of an open-ended fund?

A

Units can be issued/redeemed as required

210
Q

How do you calculate conversion value?

A

Conversion ratio x current share price

211
Q

If a gilt is trading above par, what does this mean for the relationship between the GRY and flat yield?

A

Flat yield will be higher than GRY

212
Q

How do you calculate the premium of an option?

A

Intrinsic value + time value

213
Q

Does the ex-rights price occur before or after an event?

A

After

214
Q

Who is responsible for the upkeep of a commercial property?

A

Lessee

215
Q

Who is responsible for the upkeep of a residential property?

A

Lessor

216
Q

What is another term for a fixed capital structure?

A

Closed-ended

217
Q

What kind of pricing does an Investment Trust Company offer?

A

Real time

218
Q

Between which numbers would a price be inelastic?

A

-1 and 1

219
Q

How do you calculate the cross-price elasticity of demand?

A

% change in quantity of good A / % change in quantity of good B

220
Q

How do you calculate the risk adjusted return for a bond?

A

(Rp - Rf) / (Dp/Dm)

221
Q

In the short run, which costs need to be covered for a firm to continue operating?

A

Average variable costs

222
Q

In the long run, which costs need to be covered for a firm to continue operating?

A

Average total costs

223
Q

What percentage of observations lie within 2 standard deviations of the mean?

A

95%

224
Q

How do you calculate the position of the quantiles in a range of numbers?

A

(n + 1) / 4

225
Q

Profit is a component of the which financial statement?

A

The income statement

226
Q

Loan stock is what kind of liability?

A

Non-current

227
Q

Trade creditor is what kind of liability?

A

Current

228
Q

Overdraft is what kind of liability?

A

Current

229
Q

Trade receivables is what kind of asset?

A

Current

230
Q

What is another term for operating profit?

A

PBIT (or EBIT)

231
Q

What does ILG stand for?

A

Index Linked Gilts

232
Q

How do you calculate MPC?

A

Spending / disposable income

233
Q

How do you apply a forward adjustment premium to the spot price?

A

Subtract

234
Q

How do you apply a forward adjustment discount to a spot price?

A

Add

235
Q

At what point is a put option in the money?

A

When the share price falls below the exercise price

236
Q

Which of the three credit rating agencies uses “aa” in their ratings?

A

Moodys

237
Q

How do you calculate modified duration?

A

Macaulay duration / (1+ yield)

238
Q

How do you calculate the grossed up net redemption yield?

A

Net redemption yield / (1-t)

239
Q

What is another term for an undated bond?

A

A perpetuity

240
Q

How do you calculate the price of an undated bond?

A

Coupon£ / yield

241
Q

Is the bid or ask price used if you want to sell the base currency?

A

Bid

242
Q

Is the bid or ask price used if you want to buy the base currency?

A

Ask

243
Q

Is the bid or ask used if you want to buy the variable currency?

A

Bid

244
Q

What kind of contract is a FTSE 100 future?

A

Contract for difference (CFD)

245
Q

How are CFDs settled?

A

Cash

246
Q

What is basis risk?

A

The risk that a derivative contract is closed early

247
Q

Which is cheaper, buying futures contracts or the underlying equities?

A

Futures contracts

248
Q

How is a STIR contract settled?

A

Cash

249
Q

How are transactions conducted on ICE Futures Europe?

A

Electronic order-driven

250
Q

In an equity swap, who receives the floating interest payment?

A

The payer

251
Q

In an equity swap, who pays for losses on the index?

A

The receiver

252
Q

In an equity swap, who makes a floating rate interest payment?

A

The receiver

253
Q

How are ICE Futures Europe settled?

A

Notional bond

254
Q

A rights issue is an example of what kind of issuance?

A

Secondary issuance on the primary market

255
Q

For a “1:5” rights issue, how many new shares are being issued?

A

1

256
Q

How do you calculate the future value under continuous compounding?

A

PV x (exponent ^ (r x n))

257
Q

What four factors are relevant to the arbitrage pricing model?

A

Inflation
Yield curve
GNP
Investor confidence

258
Q

How do you calculate the credit creation multiplier?

A

1 / reserve requirement

259
Q

Which entity must a company submit its annual accounts to?

A

The Registrar of Companies

260
Q

Assets - liabilities =

A

Share capital + reserves

261
Q

What are the three main headings under the IFRS cash flow statement?

A

Operating
Financing
Investing

262
Q

How are provisions treated when getting from profit to cash flow?

A

Added back in

263
Q

Revaluation surplus is included in which heading of the cash flow statement?

A

Investing activities

264
Q

Reserves are subdivided into which parts of the balance sheet?

A

Share premium account
Revaluation reserve
Other reserves

265
Q

How are goods sold under warranty or guarantee classified?

A

Contingent liabilities

266
Q

Provisions appear in which financial statement?

A

The balance sheet

267
Q

Extraordinary items are found in which financial statement?

A

The income statement

268
Q

Proposed dividends would appear in which financial statement?

A

Balance sheet

269
Q

What is price elasticity of -1 also known as?

A

Unit elastic

270
Q

Complementary goods have what kind of price elasticity?

A

Negative

271
Q

Substitute goods have what kind of cross-price elasticity?

A

Positive

272
Q

An increase in demand for a good causes what change in the demand curve?

A

Shift to the right

273
Q

What are accounting profits?

A

Profits in excess of explicit costs

274
Q

What are supernormal profits?

A

Profits in excess of all opportunity costs and explicit costs

275
Q

What is another term for supernormal profits?

A

Economic profits

276
Q

How does the industry supply curve look if all firms have the same cost curve?

A

Upward sloping

277
Q

Which portion of the demand curve will the monopolist produce in?

A

Elastic

278
Q

How do you calculate economic profit?

A

Accounting profit - the cost of the entrepreneur’s time and capital

279
Q

What is the elasticity of demand under perfect competition?

A

Infinity

280
Q

What does a high EV/EBITDA show about a company?

A

High future growth prospect

281
Q

What is the calculation for prospective P/E?

A

Current share price / future estimated earnings

282
Q

What is the calculation for prospective P/E if you are given the earnings growth?

A

Historic P/E / earnings growth

283
Q

Will a company with low P/E have low or high dividends?

A

Low

284
Q

Are VCTs closed or open ended?

A

Closed

285
Q

Are VCTs allowed to borrow?

A

Yes

286
Q

What does a question want you to do when it asks fort the “time-weighted average rate of return”?

A

Geometric mean of returns

287
Q

Which profit is used to calculate dividend cover?

A

Profit after tax

288
Q

What is the calculation to get the hedge ratio?

A

Value of the portfolio / (number of points x tick size)

289
Q

What factor do immunisation strategies take into account when choosing bonds?

A

Duration

290
Q

How do you calculate the duration based return for a portfolio?

A

(Rp - Rf) / (Dp/Dm)

291
Q

What is done with the premium in regards to finding the forward rate?

A

Subtracted

292
Q

What does OEIC stand for?

A

Open ended investment company

293
Q

Is commercial paper secured or unsecured?

A

Unsecured

294
Q

What price is commercial paper paid at compared to par?

A

At par

295
Q

How do you calculate the total risk of a well diversified portfolio?

A

Variance of the market x beta^2

296
Q

On which financial statement do extraordinary items appear?

A

Income statement

297
Q

Which body develops international financial reporting standards?

A

IASB

298
Q

On which financial statement do provisions appear?

A

Balance sheet

299
Q

Which financial statement do provisions not impact?

A

Cash flow statement

300
Q

What deposit amount is STIR based on?

A

£500,000

301
Q

What holding period is STIR based on?

A

3-months

302
Q

What is the tick size of STIR?

A

1 basis point (0.01%)

303
Q

What kind of risk is the risk that the position is closed before delivery?

A

Basis risk

304
Q

What is the tick size for a FTSE 100 Future?

A

0.5

305
Q

Which two markets cover energy derivatives?

A

NYMEX
ICE

306
Q

What market covers financial derivatives?

A

MEFF

307
Q

What tax rate do basic rate taxpayers pay on a REIT?

A

20%

308
Q

What is another term for a floating rate note?

A

Variable rate bond

309
Q

What type of debt are debentures?

A

Secured debt

310
Q

Which of the rating agencies use + and - in their ratings?

A

S&P

311
Q

What do falling interest rates do to the slope of the yield curve?

A

Downward sloping

312
Q

Which type of bond does liquidity preference theory suggest investors demand a higher premium for?

A

Longer dated

313
Q

When do gilts go ex-coupon?

A

7 days before payment date

314
Q

For a long straddle/strangle, are you buying or selling the options?

A

Buying

315
Q

At what level of ownership does a company need to start preparing consolidated accounts?

A

50%

316
Q

Which items on the balance sheet will a rights issue increase?

A

Share capital account
Share premium account

317
Q

How do you calculate the value of a right?

A

Ex-rights price - right price

318
Q

How do you calculate the theoretical value of a nil paid price?

A

Ex-rights price - subscription price

319
Q

What is the maximum amount that a single shareholder can hold of a REIT?

A

10%

320
Q

How do you calculate net operating income (property)?

A

Gross potential income - expenses

321
Q

How do you calculate a property value?

A

NOI / market capitalisation rate

322
Q

How do you calculate TWRR?

A

(End 1 / Start 1) x (End 2 / Start 2) - 1

323
Q

Are hedge funds regulated by the FCA?

A

No

324
Q

Are hedge fund managers regulate by the FCA?

A

Yes

325
Q

Does selling a unit of a unit trust affect the NAV?

A

Yes

326
Q

What happens to the time value of an option as the life of the option increases?

A

Greater time value

327
Q

What is the formula for Beta?

A

Cov / var

328
Q

Do high beta stocks have high or low volatility?

A

High

329
Q

Do high covariance stocks have high or low volatility?

A

High

330
Q

At what point does a good become elastic?

A

When price elasticity is greater than 1

331
Q

At what point does a good become inelastic?

A

When price elasticity is less than 1

332
Q

At what point does stamp duty apply?

A

When purchasing a security

333
Q

How is goodwill recorded on the balance sheet?

A

At cost less accumulated impairment charge.

334
Q

Who are the legal owners of a unit trust?

A

Trustees

335
Q

How do you calculate the weighted average cost flow?

A

Total cost of purchase / total number of units purchased

336
Q

What proportion of observations lie within 1 standard deviation of a normal distribution?

A

68.3%

337
Q

What proportion of observations lie within 2 standard deviations of a normal distribution?

A

95.5%

338
Q

What proportion of observations lie within 3 standard deviations of a normal distribution?

A

99.75%

IMC Unit 2 (3 decks)

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