Formula

Question 1

Arithmetic Mean

Answer 1

Sum of no/ total of no

Question 2

Geometric mean

Answer 2

N √(1+X) X (1+X2) X (1+X3)

Question 3

Population standard deviation

Answer 3

√sum(X-X)2/n

Question 4

Sample standard deviation

Answer 4

√Sum (X-X)2/n-1

Question 5

Variance population

Answer 5

Sum (X-X)2/n

Question 6

Variance sample

Answer 6

Sum (X-X)2/n-1

Question 7

Correlation coefficient

Answer 7

Covariance (X,Y)/ SDx X SDy

Question 8

Linear regression

Answer 8

Y=a+bX

Question 9

Compounding formula

Answer 9

TV=PV(1+R)n

Question 10

Compounding continuously

Answer 10

TV=PVxE(RxN)

Question 11

Single cashflow discounting

Answer 11

PV=TV/(1+R)n

Question 12

Annuity formula

Answer 12

PV=£X x1/Rx(1-1/(1+R)n

Question 13

Perpetuity formula

Answer 13

PV=£X/R

Question 14

Effective annual rate

Answer 14

AER=(1+R/N)n -1

Question 15

Index factor for price weighted indices

Answer 15

Sum stock prices new/ sum stock prices bases

Question 16

Index factor for market value weighted indices

Answer 16

Sum price today x no shares/ sum base x no shares

Question 17

Holding period return

Answer 17

P end-p start +income / p start

Question 18

Gordon’s growth model

Answer 18

Ex div share price= Do (1+g)/ (r-g)

Question 19

Warrant value

Answer 19

Formula value + premium value

Question 20

Percent premium

Answer 20

Premium per share/ market price per share

Question 21

Conversion price

Answer 21

NV of bond/conversion ratio

Question 22

Conversion premium

Answer 22

Market price bond/ conversion ratio - market price per share

Question 23

Theoretical convertible bond price

Answer 23

Price of vanilla bond + (call premium/ 1+% increase in stock) x conversion ratio

Question 24

PV of bond

Answer 24

Bond price = £coupon x 1/R x (1-1/(1+R)n) + CAP/(1+R)n

Question 25

Flat yield

Answer 25

Gross annual coupon/ clean price

Question 26

Gross redemption yield

Answer 26

Bond price= £Coupon x 1/R x (1-1/(1+R)n)+ CAP/(1+R)n

Question 27

Net redemption yield

Answer 27

Bond price= £Coupon (1-t) x 1/R x (1-1/(1+R)n)+ CAP/(1+R)n

Question 28

Macaulay duration

Answer 28

Sum PV cashflows x time to cashflow/ sum PV cashflows

Question 29

Interest rate parity

Answer 29

Forward/spot = (1+R var)/ (1+R base)

Question 30

Purchasing power

Answer 30

Forward/spot = (1+I var)/ (1+ I base)

Question 31

Fair value if future

Answer 31

Spot price of asset + cost of carry

Question 32

Basis

Answer 32

Spot price of asset - current futures price

Question 33

Basic hedge

Answer 33

No contracts to hedge = val of portfolio / val of futures contract

Question 34

Beta hedge

Answer 34

No contracts to hedge = val of portfolio / val of futures contract x Beta

Question 35

Option premium

Answer 35

Intrinsic value + time value

Question 36

Delta

Answer 36

Change in prem val/ change in price of underlying

Question 37

Rental yield

Answer 37

(Gross rent- expenses) / total cost of purchase

Question 38

Money weighted rate of return

Answer 38

PV= CF/(1+r) + CF / (1+r)2 + TV/(1+r)n

Question 39

Time weighted rate of return

Answer 39

(HP1 end/ HP1 start x HP2 end/HP2 start) -1

Question 40

Total risk

Answer 40

√var market risk + var specific risk

Question 41

Beta

Answer 41

Cov (Rm Rj) / var Rm

Question 42

CAPM

Answer 42

ER= Rf + beta (Rm-RF)

Question 43

Jensen

Answer 43

RP-Rcapm

Question 44

Sharpe

Answer 44

RP-RF/ standard deviation of portfolio

Question 45

Treynor

Answer 45

RP-RF/ beta

Question 46

Information ratio

Answer 46

RP-R benchmark/ standard deviation of excess return

Question 47

Bond performance

Answer 47

RP-RF/ (DP/DM)

Question 48

Bond CAPM

Answer 48

ER= Rf + DP/DM (Rm-RF)

Question 49

Annual depreciation

Answer 49

Cost of asset - residual val / useful life

Question 50

Depreciation charge

Answer 50

1 - n√expected residual val / original cost

Question 51

Earnings per share

Answer 51

Profit available to ords / no or ord shares

Question 52

Earnings yield

Answer 52

EPS/ ex div price

Question 53

Div yield

Answer 53

Net div / ex div price

Question 54

Div cover

Answer 54

EPS / net div

Question 55

Price earnings ratio

Answer 55

Share price / EPS

Question 56

Debt to equity

Answer 56

Total long term debt / total equity

Question 57

Operational gearing

Answer 57

Sales rev - var costs / trading profit = trading prof + fixed costs / trading profit

Question 58

Interest cover

Answer 58

PBIT / interest expense

Question 59

Current ratio

Answer 59

Current assets / current liabilities

Question 60

Quick ratio

Answer 60

Current assets - inventory / current liabilities = receivables + cash / current liabilities

Question 61

ROCE

Answer 61

Operating profit / cap employed = PBIT / CAP + reserves + borrowing

Question 62

Price elasticity of demand

Answer 62

% change in quantity / % change in price

Question 63

Income elasticity of demand

Answer 63

% change in quantity / % change in income

Question 64

Cross elasticity of demand

Answer 64

% change in quantity demand / % change in price of substitute or complement

Question 65

Basic multiplier

Answer 65

1/ (1-MPC)

Question 66

Full multiplier

Answer 66

1/ (1-MPC)t -MPM

Question 67

Money multiplier

Answer 67

1/ reserve requirement

Question 68

Quantity theory of money

Answer 68

MV= PT