Unit 15 Cash Management

BeccaLouJ9

Hi Guys,

I have got this skills test on Monday and was just wandering if anyone had any last minute tips or advice!? I'm okay with pretty much all of it except the GILTs, which I cant seem to grasp, no matter how many times it's explained to me! Also some of the wording re ratio's..

If anyone's taken it recently, how did you find it?

Any help would be much appreciated! Thanks!

Becca x

welshwizard

GILTS are Gilt Edged Securities

They are referred to as Gilt Edged because they are issued by the UK government and as such there is no risk of them not being honoured. Gilts are classified according to their redemption dates as follows:

•Shorts - redemption dates up to five years from today, for example. Treasury 2011 8%
•Mediums - redemption dates from five to fifteen years from today, for example, Exchequer 7% 2020
•Longs - redemption dates of more than 15 years, for example, Treasury 5% 2030
•Undated stocks - securities with no redemption dates
•Index linked stocks, for example, UK 3% 2012

Gilts are traded and the prices quoted are reported daily in the Financial Times. They are quoted for every £100 of stock.

For example, if the quoted price of Treasury 8% 2012 is £120 it means that £100 of this security will cost £120. The 8% is the annual rate of interest (the COUPON RATE) the government pays on this stock i.e £8 and this is paid in two half yearly instalments of £4. This amount is FIXED irrespective of the market price of the gilt which is why these securities are referred to as FIXED INTEREST SECURITIES. The date of 2012 is when the government will redeem the security when the redemption price equals the nominal value of the gilt, i.e. £100 of gilts are repurchased for £100.

Two YIELDS are quoted in the FT. The FLAT RATE YIELD is simply the coupon rate of interest as a percentage of the current market price. In the example above the flat rate yield would be 6.67%. The second yield is the REDEMPTION YIELD which is calculated as the interest payable up to redemption plus the redemption amount compared to the current value. This yield gives the overall return on the gilt if it is held to maturity and therefore provides a comparison with other forms of investment such as bank or building society investments.

The advantage of buying gilts compared with depositing funds with a bank or building society is that the rate of interest will be higher. A capital gain may also be made, however, there is a risk that a capital loss may be made if base rates rise.

Hope this helps you

BeccaLouJ9

Thank you for replying! Yes it has helped. I'm getting there with GILTS, and they may not even come up but best to be prepared! Thank you xxx

BeccaLouJ9

Just took this skills test and GILTs didn't even come up!! Oh well good to know for future ref I guess!

Can I talk about the questions in the test?

taskey

hi becca

was it a cba you did or paper? i am doing my mock paper based one at the moment.

please tell me it gets better lol

Tracy

BeccaLouJ9

No!! aw sorry I hated this unit. It just goes in one ear and out the other. And no matter how may times I read the books and go over it, it just does not stick!

I did paper. I didnt do a mock because my supervisor thought I didn't need to!! (Hmm- I think regretable decision!!)

Are we allowed to talk about the questions or not? I think I am prob safe to say that one of the questions I didn't think was covered in the books. But I guess I could've just blanked that bit out and it was in there somewhere!!

Good luck!

x

Arina

how did you find the test in general? excluding the question you think wasnt covered, were the rest of questions alright? was there a lot of writing?

BeccaLouJ9

Hello, The rest of the test was ok. There were a couple of writing questions and you were given a couple of pages to use for these. I did fill up both pages for one question and the others I nearly did! The rest was not too bad, so I don't really mind that I will probably have to retake this one, as I would have failed on the big Q at the end that I didn't even attempt!
x