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Personal Wealth Management > Multiple Choice Test Revision > Flashcards

Multiple Choice Test Revision Flashcards

1
Q

Present Value formula

A

(PMT[1 - (1 + i)-n ]) / i

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2
Q

NPV Calculation

A

Sum of the present value of cash inflows less the present value of cash outflows

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3
Q

Real rate of return formula

A

(1 + nominal rate)/(1 + inflation rate) - 1

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4
Q

Face value =

A

Principal + Interest

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5
Q

FV =

A

PV(1 + i)n

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6
Q

Compound interest formula

A

A = P ( 1 + R/N) ^nt

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7
Q

69 95 99.7 rule

A

About 68% of the values fall within 1 sd of the mean
95 within 2 sd
99.7 within 3sd

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8
Q

4 stages of business cycle

A

Recovery/Expansion

Boom/peak

Contraction

Recession/trough

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9
Q

Solvency ratio

A

Total net worth divided by total assets expressed as a percentage

This means that the Smiths’ family assets would need to fall by 68.28% for their ownership of their assets to fall to zero.

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10
Q

Liquidity ratio

A

Liquid assets divided by current debts expressed as a percentage

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11
Q

Savings ratio

A

Cash surplus divided by income after tax expressed as a percentage

Savings expressed as percentage of total income. It is likely that the savings ratio will be low for a young couple with small children and also for an elderly couple.

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12
Q

Debt service ratio

A

Monthly loan repayments divided by monthly net income expressed as a percentage

This ratio can be used to indicate the effect of a particular course of action

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13
Q

pv =

A

FV/(1+i)^n

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14
Q

Earnings per share (EPS)

A

provides an indication of company profitability

operating profit after tax divided by number of ordinary shares

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15
Q

Price / Earnings ratio (P/E ratio)

A

shows how much the market is prepared to pay for shares in relation to reported profits

current market price divided by eps

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16
Q

Dividends per share (DPS)

A

provides an indication of company profitability and payout of dividends

dividend to ordinary shareholders divided by number of ordinary shares

17
Q

Dividend yield ( DY)

A

relates the dividends paid to the current market price
provides an insight into the return on investment

dps divided by market price

Personal Wealth Management (11 decks)

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