Class 2: Converstion premium= conversion price – share value/ share value, Accrued interest = days elapsed/ days in current coupon * coupon per period, include the purchase day and exclude the settlement day,
Bond Pricing = Ct/(1+r)^n + Par value t / (1+r)^t where Ct = coupon payment, T number of periods to maturity and r = Yield to maturity, Bond Duration = t*PV(Ct)/V, where PV(Ct) is present value of year t cash flow discounted at implied YTM, V= Current bond value, Variance (%) = Duration/ (1+YIELD), Delta V = -Variance * change in interest rate
Class 3:Cov(r1,r2)=var(r1) variance is a special case of the covariance, p(r1,r2) = Cov(r1r2)/variance 1 and 2, portfolio variance formula based on correlation = variance p = xi*xj*pij*variance I and variance j, to find the variance square the terms and then average it out, to find covariance = sum of ( return a1 – average return a) * ( return b1 – average return b), variance of the portfolio = w1^2variance 1 + W2^2 *variance 2 + 2(w1)(w2)(covab)
Minimum variance => cov (xrs&p) + (1-x) rdf, rsnp) = x cov(rsnp,rsnp)+ (1-x)cov(rdfa,snp), = .2^2 x+ (.2)(.39)(.8 (cov))(1-x) = -.022x+.062, similarly cov (xrs&p) + (1-x) rdf, rdfa) = x cov(rsnp,rdfa)+ (1-x)cov(rdfa,dfa), = (.2)(.39)(.8)x+(1-x)(.39) = -.09x+.152 and then equate both
Class 4 : Uner US Gapp = unlevered Cash Flow = Operationg cashflow + investing cash flow +debt interest – debt interest tax subsidy | Under IFRS = unlevered cash flow = netcashflow from operating activities +net cashflow from investing activities –debt interest tax subsidy | Unlevered cashflow = PBIT + Dep – changes in WC-Cap Ex + salesof cap assets – realized capital gains + realized capital losses – PBIT*tax