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22 Jan 0

International Securities Identification Number (ISIN) Codes

The International Securities Identification Number (ISIN) is a unique identifier assigned to securities, such as stocks, bonds, or other financial instruments, to help standardise the identification of these instruments globally.

Purpose

- The ISIN code provides a unique identifier for a specific security, making it easier to track, trade, and settle securities internationally.
- It helps eliminate confusion between similar securities from different markets or companies.

Structure of an ISIN Code

An ISIN consists of 12 characters in total.
- Country Code (2 characters): This is the first two letters, based on the country of origin or the country where the issuer is based. For example, “US” for the United States, “GB” for the United Kingdom, or “DE” for Germany.
- Security Identifier (9 characters): This middle part is a unique alphanumeric code assigned to the security. It can include numbers and letters, and is issued by the relevant local or national securities authority or exchange.
- Check Digit (1 character): The last digit is a check digit calculated using the Luhn algorithm, which helps verify the integrity of the ISIN code.

For example, the ISIN for Apple Inc. stock might look like US0378331005:

- US: Country code (United States)
- 037833100: Security identifier for Apple Inc. stock
- 5: Check digit

Why ISIN Codes are Important

- Global Standardization: The ISIN provides a uniform way to identify securities across different markets and regions, helping to simplify global trading.
- Cross-border Trading: Since the ISIN is recognized internationally, it enables easier and more efficient cross-border transactions between investors, brokers, and exchanges.
- Settlement and Clearing: ISINs are used in the settlement and clearing process of securities, ensuring the right securities are exchanged between parties.
- Regulation: Regulatory bodies and institutions (like exchanges, clearing houses, and depositories) use ISINs to keep accurate records and monitor the securities market.

Who Assigns ISINs?

- ISINs are assigned by a National Numbering Agency (NNA) in each country. For instance, in the United States, the CUSIP Global Services is responsible for assigning ISINs, while in the United Kingdom, it’s the London Stock Exchange.
- The ISIN itself is generally created based on the local identifiers used in the country’s securities system, such as CUSIP numbers (in the U.S.) or SEDOL codes (in the UK).

Usage

- ISINs are used widely by investors, brokers, exchanges, and financial institutions for purposes like clearing trades, fund management, or checking the eligibility of securities for specific investment strategies.

Example:

ISIN for Microsoft Corporation: US5949181045
- US: United States
- 594918104: Unique identifier for Microsoft’s shares
- 5: Check digit

In summary, an ISIN is a globally recognized identifier for securities, designed to make international investment and trading more efficient and secure.

Complete ISIN Directory for ASX Listed Companies

International Securities Identification number (ISIN) Codes

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Protected: Term Loan / Mortgage Loan

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Financial Analysis

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Global Industry Classification Standard (GICS)

Notes

Current as at 01/01/2020.
Jointly developed by S&P Dow Jones Indices & MSCI.

Communication Services
- - Media & Entertainment
    - Entertainment
    - Interactive Media & Services
    - Media
  - Telecommunication Services
    - Diversified Telecommunication Services
    - Wireless Telecommunication Services

Consumer Discretionary
- - Automobiles & Components
    - Auto Components
    - Automobiles
  - Consumer Durables & Apparel
    - Household Durables
    - Leisure Products
    - Textiles, Apparel & Luxury Goods
  - Consumer Services
    - Diversified Consumer Goods
    - Hotels, Restaurants & Leisure
  - Retailing
    - Distributors
    - Internet & Direct Marketing Retail
    - Multiline Retail
    - Specialty Retail

Consumer Staples
- - Food & Staples Retailing
    - Food & Staples Retailing
  - Food, Beverage & Tobacco
    - Beverages
    - Food Products
    - Tobacco
  - Household & Personal Products
    - Household Products
    - Personal Products

Energy
- - Energy
    - Energy Equipment & Services
    - Oil, Gas & Consumable Fuels

Financials
- - Banks
    - Banks
    - Thrifts & Mortgage Finance
  - Diversified Financials
    - Capital Markets
    - Consumer Finance
    - Diversified Financial Services
    - Mortgage Real Estate Investment Trusts (REITS)
  - Insurance
    - Insurance

Health Care
- - Healthcare Equipment & Services
    - Health Care Equipment & Supplies
    - Health Care Providers & Services
    - Health Care Technology
  - Pharmaceuticals, Biotechnology & Life Sciences
    - Biotechnology
    - Life Sciences Tools & Services
    - Pharmaceuticals

Industrials
- - Capital Goods
    - Aerospace & Defence
    - Building Products
    - Construction & Engineering
    - Electrical Equipment
    - Industrial Conglomerates
    - Machinery
    - Trading Companies & Distributors
  - Commercial & Professional Services
    - Commercial Services & Supplies
    - Professional Services
  - Transportation
    - Air Freight & Logistics
    - Airlines
    - Marine
    - Road & Rail
    - Transportation Infrastructure

Information Technology
- - Semiconductors & Semiconductor Equipment
    - Semiconductors & Semiconductor Equipment
  - Software & Services
    - IT Services
    - Software
  - Technology, Hardware & Equipment
    - Communications Equipment
    - Electronic Equipment, Instruments & Components
    - Technology Hardware, Storage & Peripherals

Materials
- - Materials
    - Chemicals
    - Construction Materials
    - Containers & Packaging
    - Metals & Mining
    - Paper & Forest Products

Real Estate
- - Real Estate
    - Equity Real Estate Investment Truste (REITS)
    - Real Estate Management & Development

Utilities
- - Utilities
    - Electric Utilities
    - Gas Utilities
    - Independent Power & Renewable Electricity Producers
    - Multi-Utilities
    - Water Utilities

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Discount Securities

Protected: Variance

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Present Value of an Annuity

The Present Value of an Annuity (PVA) is a financial concept that calculates the current value of a series of future cash flows (payments) made at regular intervals, such as monthly or annually, based on a specific interest rate. It is widely used in various financial applications, such as determining the value of loans, mortgages, bonds, and other types of regular payment agreements.

Key Concepts

Annuity: An annuity is a sequence of equal payments made at regular intervals over a specified period. These payments can be:
- Ordinary annuity (annuity in arrears): Payments are made at the end of each period.
- Annuity due: Payments are made at the beginning of each period.
Present Value: The present value (PV) refers to how much a future cash flow is worth today, considering the time value of money. This takes into account how much the value of money decreases over time due to factors like inflation and opportunity cost of capital.
Interest Rate (r): The rate at which the value of money changes over time. Often called the discount rate, it is used to calculate how much the future payments are worth in today’s terms.
Number of Periods (n): The total number of payment periods (months, years, etc.) in the annuity.

Formula

The formula for the present value of an annuity (PVA) depends on whether the annuity is an ordinary annuity or an annuity due:

1. Ordinary Annuity (Payments at the End of Each Period)

The formula for the present value of an ordinary annuity is:

$PVA = P \times \left( \frac{1 – (1 + r)^{-n}}{r} \right)$

Where:

PVA = Present value of the annuity
P = Payment amount per period
r = Interest rate per period (as a decimal)
n = Total number of periods

2. Annuity Due (Payments at the Beginning of Each Period)

For an annuity due, payments are made at the beginning of each period, so the formula is slightly different. The formula for the present value of an annuity due is:

$PVA_{\text{due}} = P \times \left( \frac{1 – (1 + r)^{-n}}{r} \right) \times (1 + r)$

The only difference between the two formulas is the multiplication by

$(1 + r)$

at the end, which accounts for the fact that payments are made at the start of each period.

How the Formula Works

The formula calculates the present value by discounting each payment back to its present value. Here’s how the formula breaks down:

Discounting Payments: Each future payment is worth less today due to the time value of money. The further into the future a payment is, the less it is worth today. The formula includes a factor $(1 + r)^{-n}$

, which is the discount factor that adjusts for the number of periods.
Summing the Discounted Payments: The formula essentially adds up the discounted values of each payment in the series. The term $\left( \frac{1 – (1 + r)^{-n}}{r} \right)$

is a mathematical expression for the sum of the present values of all the future payments.

Example Calculation

Let’s consider an example of an ordinary annuity:

Annual payment (P): $1,000
Interest rate (r): 5% or 0.05
Number of periods (n): 5 years

Using the formula for an ordinary annuity:

$PVA = 1000 \times \left( \frac{1 – (1 + 0.05)^{-5}}{0.05} \right)$

First, calculate

$(1 + 0.05)^{-5}$

:

$(1.05)^{-5} = 0.783526$

Then:

$PVA = 1000 \times \left( \frac{1 – 0.783526}{0.05} \right) = 1000 \times \left( \frac{0.216474}{0.05} \right)$

$PVA = 1000 \times 4.32948 = 4,329.48$

So, the present value of the annuity is $4,329.48. This means that receiving $1,000 annually for 5 years, with a 5% interest rate, is equivalent to receiving $4,329.48 today.

Practical Uses

Loans and Mortgages: When a person takes out a loan, they usually agree to pay back the loan in regular installments. The lender uses the present value of the annuity formula to determine the value of the loan based on the interest rate and the loan term.
Pension Plans: If someone is promised a series of future pension payments, the present value of those payments can be calculated to determine how much the pension is worth today.
Bond Pricing: Bonds often pay regular coupons (interest payments) over their life. The present value of the bond’s coupon payments can be calculated to determine the bond’s price.
Insurance Products: Annuity products, such as those sold by insurance companies, guarantee a stream of future payments. The present value of those future payments can be calculated to assess how much the annuity is worth today.

Factors Affecting the Present Value of an Annuity

Payment Amount (P): The larger the payment, the higher the present value of the annuity.
Interest Rate (r): The higher the interest rate, the lower the present value of the annuity. This is because a higher rate makes future payments less valuable today.
Number of Periods (n): The longer the annuity lasts, the higher its present value (as long as the payment amount and interest rate remain constant).

Conclusion

The present value of an annuity is a crucial concept in finance for assessing the worth of future payments today. By taking into account the interest rate and the time value of money, it allows individuals and businesses to determine how much they would need to invest today in order to receive a series of future payments. The PVA formula is used extensively in financial planning, investment analysis, and decision-making.

Formula

$$ PV = C \left[ {1-({1+i)^{-n}}\over i} \right] $$

Calculator

Periodic Payment ($):

(i.e. 60000)

Interest Rate per Period (%):

(i.e. 6.5)

Number of Periods (#):

(i.e. 25)

Present Value:$

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Financial Analysis, Financial Planning

23 Dec 0

Protected: Portfolio Construction

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Financial Planning

Author Archive Admin

Purpose

Structure of an ISIN Code

Why ISIN Codes are Important

Who Assigns ISINs?

Usage

Complete ISIN Directory for ASX Listed Companies

Notes

Communication Services

Media & Entertainment

Telecommunication Services

Consumer Discretionary

Automobiles & Components

Consumer Durables & Apparel

Consumer Services

Retailing

Consumer Staples

Food & Staples Retailing

Food, Beverage & Tobacco

Household & Personal Products

Energy

Energy

Financials

Banks

Diversified Financials

Insurance

Health Care

Healthcare Equipment & Services

Pharmaceuticals, Biotechnology & Life Sciences

Industrials

Capital Goods

Commercial & Professional Services

Transportation

Information Technology

Semiconductors & Semiconductor Equipment

Software & Services

Technology, Hardware & Equipment

Materials

Materials

Real Estate

Real Estate

Utilities

Utilities

Key Concepts

Formula

1. Ordinary Annuity (Payments at the End of Each Period)

2. Annuity Due (Payments at the Beginning of Each Period)

How the Formula Works

Practical Uses

Factors Affecting the Present Value of an Annuity

Conclusion

Formula

Calculator