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CISI securities equations Exam with correct Answers
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CISI securities equations Exam with correct Answers
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CISI securities equations Exam withcorrect Answers
Flat Yield - Answer -(annual coupon/price) x 100
Bond sale/purchase/lump/agreement (worth) - Answer -nominal value x price / 100
Effect on price due to modified duration - Answer -modified duration (e.g.1.02) / 100 x
bond price
Conversion ratio (convertible shares) - Answer -nominal value / (conversion) price of
shares
Accrued interest - Answer -coupon x number of days since last payment / number of
days between payments
Present value (bonds) - Answer -1/(1+r)n x lump sum (i.e. the amount invested)
Price of the bond (discount factors) - Answer -sum of the individual present values
(across however many years the bond is alive)
Forward rate (interest rate parity formula) (eg. GBP/USD) - Answer -£ Spot rate x [(1 +
US$ Short-term interest rate) / 1 + UK£ Short-term interest rate)]
ROCE (equity + long term debt) - Answer -Operating profit (EBIT) / Capital employed
(NC assets - current liabilities) x 100
Gross profit margin (%) - Answer -(gross profit (revenue - direct costs) / Revenues) x
100
Operating profit margin (EBIT) - (less direct costs + admin costs etc) (%) - Answer -
(Operating profit/revenue) x 100
Debt/Equity (%) - Answer -Interest bearing debt/total equity x 100
Interest cover (x) (Times interest earned or interest coverage ratio is a measure of a
company's ability to honour its debt payments.) The higher the better - 1.5 and lower is
questionable - Answer -operating profit / interest (payments or finance costs)
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