The most comprehensive educational resources for finance

How to Calculate the Holding Period Returns

For investments, the Holding Period Return (HPR) refers to the total return earned from an investment or an investment portfolio over the holding period, that is, the period for which the asset or portfolio was held by the investor. The holding period can be anything such as 1 day, 1 month, 6 months, 1 year,

Steps in Portfolio Management Process

The investment managers will typically follow the following investment management process to manage a client’s investment portfolio. Planning The first step is planning, which involves understanding the needs of the customer. This involves analysing the investor’s objectives and constraints, and creating an Investment Policy Statement (IPS). Without really understanding investor’s objectives for investing and the

Investment Clients for Portfolio Managers

As a portfolio manager you will be looking after the investment needs of a variety of investment clients whether you are employed by a fund management company or directly contracted by the client. In this article we will describe the key investment clients which can be broadly classified as individuals and institutional investors. Individual Investors

What is Private Equity?

A lot is said about private equity but what is it really? Watch this video to find out. The video brings the private equity business model to life. The video describes the process by which private equity firms partner with investors such as pension funds and charitable endowments to purchase companies that need capital and

8 Mistakes CFA Candidates Make

If you’re sitting for the December exam, hopefully you’ve already started your first study session – you still have a decent lead time to exam day, this is prime time to start. Here are 8 serious mistakes that CFA® candidates tend to make – mainly aimed at Level I candidates but candidates at subsequent levels

Overview of Hypothesis Testing

This video covers the first three LOS of CFA Level 1 syllabus related to the reading on Hypothesis testing, namely: Define a hypothesis, describe the steps of hypothesis testing, describe and interpret the choice of the null and alternative hypotheses, and distinguish between one-tailed and two-tailed tests of hypotheses; Explain a test statistic, Type I

How to Compute Bond Yield (YTM) Using Texas Instruments BA II+

This video demonstrates the basic functionality of the Texas Instruments BA II Plus Financial Calculator. It teaches you how to use the calculator to calculate the yield of a bond. Given four inputs (price, term/maturity, coupon rate, and face/par value), we can use the calculator’s I/Y to find the bond’s yield (yield to maturity). This

Conflict Between NPV and IRR

When you are analyzing a single conventional project, both NPV and IRR will provide you the same indicator about whether to accept the project or not. However, when comparing two projects, the NPV and IRR may provide conflicting results. It may be so that one project has higher NPV while the other has a higher

Calculating Profitability Index of a Project

The profitability index, also known as the profit investment ratio, is calculated as the ratio of the present value of the future cash flows and the initial investment in the project. Since NPV is the difference between the present value of future cash flows and initial investment, the profitability index can also be expressed in

How to Calculate Discounted Payback Period

We learned that one of the drawbacks of payback period is that it does not consider time value of money. An alternative is to use the discounted payback period. The discounted payback period is the number of years it takes to recover the initial investment in terms of the present value of the cash flows.