Flashcards in Chapter 5 - Risk and Returns Deck (19)
Real Rate of Interest
(Current price-nominal)/Current Price
Periodic Yield/(365/period to repayment)
Works out what you would earn over year. Works with bills and paper
Index linked adjustment
Coupon=Coupon*(New RPI/Old RPI)
Present value * (1+R)n
(Cashflow/1+R) + (Cashflow/1+R2) + (Cashflow/1+R3)
Annuity formula Plus (bond value)
Flat yield/Income yield/Simple yield
GRY (Japanese Method)
FY+((Profit or Loss at redemption/remaining years)/Market Price)
Annuity formula plus (for a discount value higher and lower than the Japanese method approximates). Then calculate the spread between the two.
(Ans 1/spread)*percentage between spreads + discount.
Gross equivalent yield=(Net redemption yield/(0.8 or 0.6 or 0.55))*100
(1+r*1+r*1+r)-1 (Used to find CdV Performance)
(Present Value of Cash flow * time to cash flow)/Bonds price
Basically calculate the bonds price using annuity plus, the go pack an multiply each cash flow by the years to maturity and add them all up. Divide by bonds price.
Where present value of flows = Coupons*1+Rn's
So 10/1.= 9.26 * 1 year = 9.26