July 2013

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CIIA Exam Preparation: Corporate Finance – Implicit ROE calculation according to the Gordon-Shapiro model

I found the explanation in the solution to one of the past CIIA exam questions on implicit ROE calculation insufficient to fully understand at first, so I thought I’d provide the full solution here including question; Question: The PE ratio of Zurb Company is 15. Using a discount rate of 10% and knowing that the retention rate of earnings is 70%, the implicit ROE according to the Gordon-Shapiro model, is…


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TI BA II Plus: Calculating Duration, Modified Duration, Price Impact for change in YTM by +50bp

Exam Question: At the end of May 2013, one of your clients wants to invest 10’000 EUR in the bond market to diversify his fixed income portfolio. You will propose a bond 3,5% Italy 31.05.2016 (annual coupon). The yield to maturity of this bond is 2,7%. In case of an increase of 50 basis points, what will be the impact on the bond’s price? Step 1: Calulate Bond Price with…