Common Equity Tier 1 (CET1)
What is Common Equity Tier 1 (CET1)? Common Equity Tier 1 (CET1) is a component of Tier 1 Capital, and it encompasses ordinary shares and retained earnings. The implementation of CET1 began in 2014 as part of Basel III regulations aimed at cushioning a local economy from a financial crisis. The Basel III accord introduced...
Money vs. Time-Weighted Return
What are Money and Time-Weighted Returns? Money and time-weighted returns are rates of return typically used to assess the performance of a managed investment portfolio. Today, the time-weighted rate of return is the industry standard since it provides a fairer assessment of an investment manager’s performance. Money-Weighted Return When it comes to monitoring investment performance, money-weighted...
FICO Score
What is a FICO Score? A FICO score, more commonly known as a credit score, is a three-digit number that is used to assess how likely a person is to repay the credit if the individual is given a credit card or if a lender loans them money. FICO scores are also used to help...
M&M Theorem
What is the M&M Theorem? The M&M Theorem, or the Modigliani-Miller Theorem, is one of the most important theorems in corporate finance. The theorem was developed by economists Franco Modigliani and Merton Miller in 1958. The main idea of the M&M theory is that the capital structure of a company does not affect its overall...
Calculating Yield on Debt
How Can We Calculate Yield on Debt? Debt yield refers to the rate of return an investor can expect to earn if he/she holds a debt instrument until maturity. Such instruments include government-backed T-bills, corporate bonds, private debt agreements, and other fixed income securities. In this article, we will explore the four different types of...
