IAD Questions - Equations Flashcards
Annual Effective Rate (AER)
(Eg. Annual rate is 7% and compounded semi-annually)
{Rate / Period}, +1, ^Periods
Flat Yield
(Eg. Treasury 4% with 4yrs left to maturity and market value of £103.50)
Rate / Value
Gross Redemption Yield (GRY)
(Eg. 9yr 3.5% bond at £107)
Value - Par/Period/Value x 100
Real Returns
(Eg. Savings account paying 5% nominal and assuming 2.5% inflation)
1+Nominal / 1+Inflation
CAPM
(Eg. Market average is 10.5%, risk-free is 2.4% and Beta of portfolio is 1.3)
RiskFree + (MarketRate - RiskFree)Beta
Time-weighted rate of return
(End1/Start1) x (End2/Start2) -1 x100
Present Value of Perpetuity
(Eg. £1500 paid annually, assuming 7% interest)
Annual payment / Rate
Present value of Annuity
(Eg. 3yr annuity of £170pa, assuming 5% interest rate)
Annual payment x 1/Rate x 1-1/1+Rate^Period
Net Asset Value (NAV)
(Eg. Assets of £15m, liabilities of £6m, 2m shares in issue)
Assets - Debt / Total shares
Future Value
(Eg. £2000 earning 10%pa, what’s worth in 3yrs)
Deposit x 1+rate ^ period
Present Value
(Eg. £75k received in 8yrs, interest of 8%)
Future Value/ 1+rate ^ period
Earnings Per Share (EPS)
Profits / shares
Dividend Yield
Dividend per share / price
Price/Earnings Ratio
(Eg. Profits £4m, 2m shares, share price £9.50)
EPS / Price
Dividend Cover
EPS / Dividend per share