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#finance #steiner-mastering-financial-calculations-3ed
When you calculate compounded interest rate, the underlying assumption is that intermediate cashflows can be reinvested at the same rate.
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#finance #steiner-mastering-financial-calculations-3ed
Yields for financial instruments are generally quoted in the market in simple (i.e. not compounded) way, regardless of whether they are short-term money market instruments such as treasury bills and deposits, or long-term capital markets instruments such as bonds and swaps.
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#finance #steiner-mastering-financial-calculations-3ed
if a 1-year deposit pays 2.5% each 3 months, the interest is quoted as 10% (no compounding effect is taken into account)
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#finance #steiner-mastering-financial-calculations-3ed
An NPV is the sum of a series of PVs, of which some might be positive and some negative.
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#finance #steiner-mastering-financial-calculations-3ed
An internal rate of return (IRR) is the one single interest rate which it is necessary to use when discounting aseries of future values to achieve a given net present value.
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#finance #steiner-mastering-financial-calculations-3ed
An internal rate of return is sometimes known as a money-weighted rate of return, because the rate so calculated varies according to the cashflows arising over the period.
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#finance #steiner-mastering-financial-calculations-3ed
the absolute rate of return, rarely quoted is NOT necessarily per annum but per period of investment
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#finance #steiner-mastering-financial-calculations-3ed
Internal Rate of Return calculated by by discounting all future cashflows and equating it to current price of an instrument is equivalent to the interest rate which it is necessary to use when discounting a series of future values and a cashflow now, to achieve a zero present value (simply substract NPV from both sides of the equation).
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#finance #steiner-mastering-financial-calculations-3ed
the time-weighted rate of return is a geometric average. It can be calculated by compounding the growth for periods between flows of new money; for example when you invest into a fund now and then year later, to collect all the money 2 years from now.
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#finance #steiner-mastering-financial-calculations-3ed
time-weighted rate or return might be preferred to money-weighted rate of return (aka internal rate of return) for comparing the management of two funds for example, because the addition of new money is outside the control of the fund manager.
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Flashcard 149645671

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#finance #steiner-mastering-financial-calculations-3ed
Question
If you invest in a fund 100 now, after 6 months the fund's value is 105, you add another 50 to the fund and after another 6 months (so a year from now), the fund's value is 170, what is the time-weighted rate of return of the year for this fund? Give the equation.
Answer
\(\frac{105}{100}\times\frac{170}{155} - 1\)

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#finance #steiner-mastering-financial-calculations-3ed
The payment stream of an annuity can also last indefinitely, in which case the annuity is known as a perpetual.
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#finance #steiner-mastering-financial-calculations-3ed
Historically, the term "Euro" has been used to describe any instrument which is held outside the country whose currency is involved. The term does not imply "European".
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#finance #steiner-mastering-financial-calculations-3ed
sterling deposit made in New York is called Eurosterling
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#finance #steiner-mastering-financial-calculations-3ed
US dollar commercial paper issued outside the USA is called Euro-commercial paper while US dollar commercial paper issued inside the USA is called domestic commercial paper.
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#finance #steiner-mastering-financial-calculations-3ed
Face value = nominal amount = principal
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#finance #steiner-mastering-financial-calculations-3ed
When the principal is not trasnferred between parties, and only used for calculations, it is referred to as a "notional" principal.
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#finance #steiner-mastering-financial-calculations-3ed
The "bid" price or rate is the rate at which the dealer quoting the price is prepared to buy or borrow.
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Flashcard 149645765

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#finance #steiner-mastering-financial-calculations-3ed
Question
The "[bid or ask?]" price or rate is the rate at which the dealer quoting the price is prepared to buy or borrow.
Answer
bid

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The "bid" price or rate is the rate at which the dealer quoting the price is prepared to buy or borrow.

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Flashcard 149645776

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#finance #steiner-mastering-financial-calculations-3ed
Question
The "bid" price or [just one example] is at which the dealer quoting the price is prepared to buy or borrow.
Answer
rate

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The "bid" price or rate is the rate at which the dealer quoting the price is prepared to buy or borrow.

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Flashcard 149645787

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#finance #steiner-mastering-financial-calculations-3ed
Question
The "bid" price or rate is the rate at which the dealer quoting the price is prepared to [...]or borrow.
Answer
buy

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The "bid" price or rate is the rate at which the dealer quoting the price is prepared to buy or borrow.

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Flashcard 149645794

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#finance #steiner-mastering-financial-calculations-3ed
Question
The "bid" price or rate is the rate at which the dealer quoting the price is prepared to buy or [...].
Answer
borrow

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The "bid" price or rate is the rate at which the dealer quoting the price is prepared to buy or borrow.

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#finance #steiner-mastering-financial-calculations-3ed
The "offer" (or "ask") rate is the rate or price at which the dealer is prepared to sell or lend.
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Flashcard 149645810

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#finance #steiner-mastering-financial-calculations-3ed
Question
The "[...]" (or "ask") rate is the rate or price at which the dealer is prepared to sell or lend.
Answer
offer

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The "offer" (or "ask") rate is the rate or price at which the dealer is prepared to sell or lend.

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Flashcard 149645817

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#finance #steiner-mastering-financial-calculations-3ed
Question
The "offer" (or "[...]") rate is the rate or price at which the dealer is prepared to sell or lend.
Answer
ask

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The "offer" (or "ask") rate is the rate or price at which the dealer is prepared to sell or lend.

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Flashcard 149645824

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#finance #steiner-mastering-financial-calculations-3ed
Question
The "offer" (or "ask") rate is the rate or price at which the dealer is prepared to [...]or lend.
Answer
sell

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The "offer" (or "ask") rate is the rate or price at which the dealer is prepared to sell or lend.

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Flashcard 149645831

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#finance #steiner-mastering-financial-calculations-3ed
Question
The "offer" (or "ask") rate is the rate or price at which the dealer is prepared to sell or [...].
Answer
lend

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#finance #steiner-mastering-financial-calculations-3ed
with cash, the dealer's bid means that he or she is willing to receive the cash (i.e. borrow cash) at that interest rate.
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Flashcard 149645847

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#finance #steiner-mastering-financial-calculations-3ed
Question
with cash, the dealer's bid means that he or she is willing to [...]at that interest rate.
Answer
receive the cash (i.e. borrow cash)

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with cash, the dealer's bid means that he or she is willing to receive the cash (i.e. borrow cash) at that interest rate.

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Flashcard 149645854

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#finance #steiner-mastering-financial-calculations-3ed
Question
with cash, the dealer's [bid or ask?] means that he or she is willing to receive the cash (i.e. borrow cash) at that interest rate.
Answer
bid

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with cash, the dealer's bid means that he or she is willing to receive the cash (i.e. borrow cash) at that interest rate.

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#finance #steiner-mastering-financial-calculations-3ed
with a negotiable security, dealer's bid means that he is willing to receive the security and pay cash (i.e. invest cash) at that rate or price.
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Flashcard 149645874

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#finance #steiner-mastering-financial-calculations-3ed
Question
with a negotiable security, dealer's [bid or ask?] means that he is willing to receive the security and pay cash (i.e. invest cash) at that rate or price.
Answer
bid

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with a negotiable security, dealer's bid means that he is willing to receive the security and pay cash (i.e. invest cash) at that rate or price.

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Flashcard 149645885

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#finance #steiner-mastering-financial-calculations-3ed
Question
with a negotiable security, dealer's bid means that he is willing to [...]at that rate or price.
Answer
receive the security and pay cash (i.e. invest cash)

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with a negotiable security, dealer's bid means that he is willing to receive the security and pay cash (i.e. invest cash) at that rate or price.

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#finance #steiner-mastering-financial-calculations-3ed
the bid and offer are not always quoted in that order (bid first, then offer) - they might be quoted the other way round.
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Flashcard 149645903

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Question
Is LIBOR or LIBID the higher side?
Answer
LIBOR is always the higher side (because it is a loan, and LIBOR is Offering Rate, i.e. "I want to lend cash", so obviously I want to lend at higher rate than I want to borrow)

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Flashcard 149645914

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#finance #steiner-mastering-financial-calculations-3ed
Question
LIBOR for GBP refers to GBP loans/deposits starting [when?].
Answer
today

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#finance #steiner-mastering-financial-calculations-3ed
LIBOR for currencies other than GBP, including EURIBOR, which is specifically for EUR, refer to loans/deposits starting in 2 days time (aka "spot")
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Flashcard 149645934

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#finance #steiner-mastering-financial-calculations-3ed
Question
LIBOR for currencies other than GBP, including EURIBOR, which is specifically for EUR, refer to loans/deposits starting in [...] ("spot")
Answer
2 days time

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LIBOR for currencies other than GBP, including EURIBOR, which is specifically for EUR, refer to loans/deposits starting in 2 days time ("spot")

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Flashcard 149645945

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#finance #steiner-mastering-financial-calculations-3ed
Question
LIBOR for currencies other than GBP, including EURIBOR, which is specifically for EUR, refer to loans/deposits starting in 2 days time (aka "[...]")
Answer
spot

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LIBOR for currencies other than GBP, including EURIBOR, which is specifically for EUR, refer to loans/deposits starting in 2 days time (aka "spot")

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#finance #steiner-mastering-financial-calculations-3ed
EONIA an average of the EUR overnight rate as traded throughout the day, weighted by the volume.
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Flashcard 149645967

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Question
EONIA stands for ....
Answer
"Euro overnight index average"

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Flashcard 149645978

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#finance #steiner-mastering-financial-calculations-3ed
Question
EONIA is published by ....
Answer
ECB (European Central Bank)

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#finance #steiner-mastering-financial-calculations-3ed
EURONIA is a rate similar to EONIA published in the London market
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Flashcard 149645998

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Question
[...] is a rate similar to EONIA published in the London market
Answer
EURONIA

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EURONIA is a rate similar to EONIA published in the London market

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Flashcard 149646005

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#finance #steiner-mastering-financial-calculations-3ed
Question
SONIA stands for ....
Answer
"Sterling overnight index average"

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Flashcard 149646016

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#finance #steiner-mastering-financial-calculations-3ed
Question
EONIA equivalent for GBP is called ....
Answer
SONIA ("Sterling overnight index average")

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Flashcard 149646027

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Question
EONIA equivalent for USD is called ....
Answer
Fed Funds Effective

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#finance #steiner-mastering-financial-calculations-3ed
In some markets, the overnight index is published the morning after the day to which it relates
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#finance #steiner-mastering-financial-calculations-3ed
In Swiss francs, transactions similar to EONIA based are based on the tom/next rate rather than the overnight rate.
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#finance #steiner-mastering-financial-calculations-3ed
tom/next rate used in Swiss franc transactions that are analog to EONIA transactions is not an average, but a fixing at 11:00 am
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Flashcard 149646071

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Question
The "tenor" of an instrument is the [...]
Answer
length of time until it matures.

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