Exam-day cram sheet
30 exam questions in 60 minutes, split as: Ch 1 · 1Ch 2 · 4Ch 3 · 5Ch 4 · 5Ch 5 · 5Ch 6 · 1Ch 7 · 4Ch 8 · 5. Chapters 3, 4, 5 and 8 carry 5 questions each (20 of 30), so protect your time for them. Each card title links to the full walkthrough section.
All the formulas in one place
Trap: yield and capital gain use different bases. Yield divides by the price; a bond's coupon is on nominal; a capital gain % divides by what you paid.
| Four principles | Honest · Open · Transparent · Fair |
| CISI restatement | Clear and honest |
| Impartial and open |
| Straightforward and transparent |
| Informed and fair |
| Ethics vs law | Unethical ≠ always illegal |
| Wells Fargo | No-consent accounts · $3bn |
Trap: the fourth principle is FAIR (not legal). Illegal is always unethical, but legal is not always ethical.
| E: environmental | Energy · waste · resources |
| S: social | Community · staff · suppliers |
| G: governance | Board diversity · exec vs non-exec |
| Responsible investing | Avoid harm (tobacco, gambling, alcohol, weapons) |
| Impact investing | Return + positive impact |
| Gender lens | Women and equality |
| Microfinance | Small loans + education |
Trap: board diversity is G, not S. Responsible = avoid the bad; impact = back the good.
| Three links | Banks · equity · bonds |
| Wealthy saver | HNWI |
| Surplus vs profit | Costs come out of surplus |
| Equity | Ownership · no interest · no repayment |
| Bond | IOU · interest · set date |
| Governments | Issue bonds, not equity |
| Government savers | Norway · Gulf · Singapore |
Trap: insurance is NOT one of the three links. It is risk management.
| Risk and reward | Higher risk, higher potential reward |
| Riskier asset class | Equities over bonds |
| Riskier issuer | Small / weak over large / strong |
| Shares trade | On exchanges |
| Bonds trade | Mostly OTC |
| Insurance | Premium in, claim out |
| Reinsurance | Insurer insures itself |
Trap: a bondholder who wants out before maturity sells OTC; the issuer does not repay early.
| Loan | Set term/rate · unsecured |
| Mortgage | Long · variable · secured |
| Overdraft | Flexible · on demand · fee |
| Credit card | ~20% pa on unpaid balance |
| UK payday cap (2015) | 0.8% per day |
| 0.8% a day | 292% quoted · 1,733% EAR |
| English student loan | 9% above threshold · RPI interest · written off after 25/30/40 yrs |
| Commercial bank | US: all deposit-takers · elsewhere: business banking |
Trap: student loan repayments are 9% of income ABOVE the threshold, not of total income.
| Annual charging | EAR = quoted |
| More frequent charging | EAR > quoted |
| 10% quarterly | 10.38% |
| 10% monthly | 10.47% |
| 8% quarterly | 8.24% |
| 12% quarterly | 12.55% |
| 1% a month | 12.68% (12% quoted) |
| 2% a month | 26.82% (24% quoted) |
Trap: same quoted rate, so the lender charging LESS often is cheaper. Annualise daily and monthly quotes before comparing.
| Secured | Cheaper (less lender risk) |
| 80% loan-to-value | Value can fall 20% |
| Dearest borrowing | Payday and pawnbroker |
| Investment bank | Capital raising + M&A |
| Risky project | Suits equity |
| Saleable asset | Suits debt |
| Central bank roles | Banks' banker · govt's banker · regulator |
| UK base rate set by | Bank of England MPC |
Trap: a central bank does not take high-street deposits. Lender of last resort sits under "banker to the banks".
| Why issue shares | Raise finance |
| CareerComic | $1 vs $30 · 200 shares · Warren 50% |
| Fuelmonitor | 30 + 20 new → 60% / 40% |
| IPO | First offer to the public |
| Listed | Trades on an exchange |
| Private sale to one person | NOT an IPO |
Trap: later investors usually pay MORE per share than founders because the idea has been developed.
| Two returns | Dividends + capital gain |
| Dividends set by | Management (profit + expectation) |
| $6 on $150 | 4% yield |
| $2.40 on $80 | 3% yield |
| Buy $40, sell $52 | 30% gain |
| Voting | At least annually · simple majority |
| Bankruptcy | Lenders first · shares can go to zero |
| Limit of loss | Amount invested |
Trap: gain is only realised on SALE. Yield uses the yearly dividend total, not profit.
| Nominal = par = face | Repaid at redemption |
| Redemption = maturity | Repayment date |
| Coupon | Rate on nominal ($1,000 × 5% = $50) |
| Semi-annual | $25 twice |
| Flat yield | Coupon ÷ price ($50 ÷ $800 = 6.25%) |
| Yield to maturity | Adds gain or loss to redemption |
| Rates up | Prices down (see-saw) |
| Green / blue bonds | Environment / oceans |
| UK government bonds | Gilts |
Trap: yield equals coupon only when the price equals nominal. Longer bonds pay higher coupons (more risk).
| Advantages | Predictable income · fixed maturity |
| Disadvantages | Default · rising credit risk cuts price |
| Agencies | Moody's · S&P · Fitch |
| Safest / lowest | AAA (Aaa) / D (S&P, Fitch); C (Moody's) |
| Investment grade line | Just below BBB / Baa |
| Leverage | Debt share of funding |
| 50/50 funded, +20% value | Equity +40% |
| 50/50 funded, −10% value | Equity −20% |
Trap: leverage magnifies gains AND losses. Higher rating letters (AAA) mean LESS risk.
| Derivative | Priced from an underlying asset |
| Two uses | Hedging · speculation |
| First exchange | CBOT, 1848 |
| Future | Binding · exchange-traded · standardised · only price negotiated |
| Option | Right not obligation · premium non-refundable |
| Call / put | Buy / sell |
| Call buyer max loss | Premium |
| $100 call, $10 premium | $120: +$10 · $100/$95: −$10 |
| Break-even | Exercise + premium |
Trap: future = obligation; option = right. Seller of a call has theoretically unlimited loss unless holding the shares.
| Exchange role | Match buyers and sellers |
| Access | Via member firms |
| Listed | = public company · more liquid |
| Index | General price movement · benchmark |
| Single vs global | One market vs many |
| 12% vs index 15% | −3% (underperformed) |
| 9% vs index 7% | +2% (outperformed) |
| Weighting | Larger firms move it more |
| Points | Only meaningful vs earlier level |
Trap: a portfolio that rises can still underperform if its benchmark rose more.
| DJIA | US · 30 companies |
| S&P 500 | US · 500 companies |
| NASDAQ | US · technology exchange |
| FTSE 100 | UK · 100 companies |
| DAX | Germany |
| Hang Seng | Hong Kong / China |
| Nikkei 225 | Japan |
Trap: do not mix up DAX (Germany) with FTSE (UK), or Hang Seng (Hong Kong) with Nikkei (Japan).
| Fund benefits | Pooling · diversification · fractions · expertise |
| Fund vs direct | Indirect vs direct investment |
| $300 in $100,000 fund | 0.3% |
| FX quote | Low left · high right · dealer's margin |
| £0.74 to £0.80 per $ | Selling $ = £0.74 |
| Flip a quote | 1 ÷ rate (1.25 → 0.80) |
| $300 at 0.85 | €255 |
| FX volume (BIS 2025) | $9.6tn/day · USD 89% · EUR 29% · JPY 17% |
| Crypto | Encrypted · buy / earn / mine · speculative |
Trap: the dealer gives you the worse of the two quoted figures.
| Personal vs corporate | Individual vs company cover |
| Syndication | Insurers share a risk (5 = 20% each) |
| Pension sources | Personal · employer · state |
| Longevity issue | Longer lives need more funding |
| Financial planning aim | Client's objectives |
| Power of attorney | Acts if you are incapable |
| Will / intestate | Directs estate / no will |
Trap: syndication = many insurers, one risk; reinsurance = an insurer insuring itself.
| No-frills platform | Execution-only · cheapest |
| Premium platform | Screening tools · no advice |
| Robo-adviser | Questionnaire + algorithm |
| Order book | Matches bids and asks |
| HFT | Algorithms · speed · co-location |
| DLT | Nodes · consensus · no single point of failure |
| Blockchain | One type of DLT (Bitcoin) |
| Crowdfunding | Donation · debt · equity |
| Peer-to-peer | Platform matches; earns a fee |
Trap: a peer-to-peer platform does not take deposits or lend its own money, unlike a bank.
Exam-day metadata
| Format | 30 questions · 60 minutes |
| Heaviest chapters | Ch 3, 4, 5, 8 · 5 Qs each (20 of 30) |
| Medium chapters | Ch 2 and Ch 7 · 4 Qs each |
| Lightest chapters | Ch 1 and Ch 6 · 1 Q each |
| Calculation topics | EAR · dividend yield · capital gain · bond yield · leverage · call payoff · FX · ownership % |
| Best attack order | Ch 3, 4, 5, 8, 2, 7, 6, 1 |
Strategy: the calculations are short and every one is on this sheet. Write the formula down first, substitute, then sanity-check the direction (EAR above quoted, yield above coupon when price is below nominal).