Formula

sp−pp
∗365
1. Yield of treasury = pp
n
par− pp
∗360
2. Yield of discount = par
n
fv− pp
∗360
3. Yield of commercial paper = pp
n
sp−pp
∗360
4. yield of repurchase agreement = pp
n

5. FV= pv∗( 1+r )n

p 1−p 0
6. percentage change in swap= p0

7. Yield of effective= ( 1+ yield of foreign currency )( 1+%change∈swap )−1

p 1−p 0+ interest
8. Rate of NCD = po

1
9.Non zero po = cp∗
[ 1−
( 1+r )n
r ]+
fv
( 1+r )
n

fv
10. Zero =
( 1+ rb )n
sp− pp+cp
11. yield of annualized = pp

12. Price elasticity = %change in price/%change in Rb

¯ ¯¿ ¿
13. Sharpe index= Rm −Rf σ

¯ ¯¿ ¿
14. Treynor index = rm −rf β

15. Expected rate of return= rf + β ( rm−rf )

16. stock value = expected Earnings per share* mean industry P/E ration
17. DDM = DDM/Req. rate of return
d1
18. Constant growth model, po = ℜ−g

19. re = Rf + β ( rm−rf )

Theory

1. treasury bills: treasury bill is secured, short term debt security, it is issued by
government. when govt. needs to borrow funds the govt. treasury frequently issues
short-term security known as treasury bills. It can be issued for 4,13 and 26 weeks.
2. Cash management bills: its bills maturity is less than 4 weeks. The issue can be
also monthly basis.
3. Credit risk: it is uncertain that the money will not be regain able. there is no
credit risk in treasury bills.
4. Liquidity: How easily can we liquid our money is liquidity. Treasury bill is
extremely liquid.
6. face value/par value/maturity value.
7. only treasury bill yield will count with 365 days and everything will count 360
days for a year.
8. purchase price decrease, return will increase.
9. selling price decrease return will decrease.
10. Days is less, return will increase.
11. Commercial paper: Commercial paper is opposite of treasury bills. It is
unsecured, short term debt instruments and issued by corp. it is issued to provide
liquidity or finance a firm’s investment in inventory and a/c receivable. It is
cheaper source of funds. Finance companies and bank holding companies are
major issuer of commercial paper. Normal maturity day is between 20 and 45 days.
12. Repurchase agreement: It is an agreement between two parties and there must
be a condition that after a fixed day the second party have to sell back the
securities to first party. in here, for party A this is repurchase agreement and for
party B this is reverse repurchase agreement.
13. NCD/FDR/Time deposit: Negotiable certificate of deposit can be issued by
large commercial banks and other institutions as a short-term source of funds.
14. federal funds: CRR/cash reserve ration is 4 % and SLR/statutory liquidity
ration is 13% in total 17%. Remaining 83% bank can issue as loan.
15. International payment methods: A. pre-payment method (good for
exporters). B. L/C letter of credit. C. Cash against documents. D. open accounts
(good for importers).
16. Bonds: it is long term debt securities. It is issued by govt. or corp. it has
maturities of between 10 to 30 years.
17. treasury notes: it has maturities of 1 to 10 years.
18. 3 types of bonds: zero, non-zero and perpetual bonds.
19. Call provisions: call provisions normally require the firm to pay a price above
par value when it is calls bonds. The difference between the bonds call price and
par value is call premium. This is a right of an issuer before the maturity date to
buyback is called call provisions.
20. convertibility: it is a right of a holder to exchange his bond to stock market
with a stated price.
21. TIPS = treasury inflation protected security.
22. Preferred stock: it is a stock that entitles the holder to a fixed dividend,
whose payment takes priority over that of ordinary share dividends and it has no
voting rights to shareholders.
23. Common stock: common stockholders are last in line when they have to be
paid out and they do not entitle with fixed dividend. Common stockholders have
voting rights.
24. Stock: stock is a certificate of ownership. Stocks are an equity investment that
represents part ownership in a corporation and entitles you to part of that
corporation's earnings and assets.
25. L/C: it’s a guarantee from the buyer’s bank that the bank will take the
responsibility of paying the amount of the product.