CISI IRT Calculations: Formulas, Tax Years and Exam Practice

Table of Contents

• • Use the syllabus weighting to choose practice time
• • Separate coupon, running yield and redemption yield
• • Treat the tax year as an input
• • Keep portfolio growth separate from contributions and currency
• • Use every wrong answer to identify a specific error
• • Try the course before a full timed paper

The CISI Investment, Risk and Taxation exam combines investment knowledge with numerical application and client judgement. A candidate can remember a formula and still lose a mark by using the wrong price, tax year or denominator. Build revision around those choices: define the measure, identify its inputs and check what the result actually means.

The scored examination contains 80 multiple-choice questions in 120 minutes, with a pass boundary of 56 correct answers. CISI may include additional unidentified trial questions and proportionate time. The official Investment Advice Diploma page links the unit’s syllabus and candidate information. Check the Candidate Update alongside your study material: a published correction can change the method or answer you should learn.

Use the syllabus weighting to choose practice time

The eight chapters do not receive equal exam weight. The base allocation below provides a sensible starting point; the official syllabus allows variation of up to two questions per element.

Chapter	Base questions
Asset Classes	13
Fundamental Analysis	6
Principles of Investment Risk and Return	9
Taxation of Investors and Investments	16
Investment Products	13
Portfolio Construction and Planning	5
The Process of Giving Investment Advice	13
Portfolio Performance and Review	5

Taxation has the largest individual allocation, but tax also appears inside investment-product decisions. Similarly, risk measures matter when constructing a portfolio and reviewing performance. Study those connections while keeping the definitions separate. A strong tax score cannot compensate reliably for leaving an entire smaller chapter untouched.

Separate coupon, running yield and redemption yield

Suppose a bond pays an annual £5 coupon per £100 nominal, costs £96 and redeems at £100 in four years. Ignore tax and dealing costs for this example.

Running yield = annual coupon ÷ market price. Here it is £5 ÷ £96 × 100 = 5.2083%. The coupon rate is 5% of nominal; that is a different denominator. Paying below nominal raises the income yield above the coupon rate.

The workbook approximation for redemption yield adds the annualised capital component to the running yield:

Approximate redemption yield = coupon ÷ price + (redemption − price) ÷ (price × years).

Using the same inputs gives 5 ÷ 96 + 4 ÷ (96 × 4) = 6.25%. This is an approximation rather than an exact internal rate of return. Check whether an exam question requests running yield, capital return or redemption yield before calculating. An answer can be arithmetically correct for the wrong measure.

Treat the tax year as an input

The core tax exercises in our course identify 2025/26 unless another date is stated. Dated updates distinguish later changes. This prevents a common revision error: reading a current tax table and applying it to a question deliberately set in an earlier year.

Write down the year, jurisdiction, taxpayer and type of income before choosing a rate. Then separate allowances from nil-rate bands, and distinguish exemption from deferral. An investment-bond withdrawal within a cumulative tax-deferred facility is not the same as permanently tax-free income.

For example, assume an individual in England has £60,000 employment income in 2025/26, the standard £12,570 personal allowance, no other income and no adjustments. Taxable income is £47,430. Tax on £37,700 at 20% is £7,540; the remaining £9,730 at 40% gives £3,892. Total income tax is £11,432. This example excludes National Insurance and uses its expressly stated assumptions.

The useful revision habit is the order of operations: establish the available allowance, calculate taxable income, split it across the relevant bands, then total the liabilities. Do not treat the higher marginal rate as a rate on every pound of income.

Keep portfolio growth separate from contributions and currency

Adding money to a portfolio increases its value without creating an investment return. When external flows occur, identify whether the question asks for a linked time-weighted measure or an investor-sensitive money-weighted measure. A convenient approximation should not be labelled exact IRR.

Currency introduces another layer. Suppose £20,000 is invested at $1.50 per pound. The foreign asset grows by 25%, and the final exchange rate is $1.90 per pound. The steps are:

1. Convert the initial investment: £20,000 × 1.50 = $30,000.
2. Apply asset growth: $30,000 × 1.25 = $37,500.
3. Convert back: $37,500 ÷ 1.90 = £19,736.84.
4. Compare with the original sterling investment: a loss of £263.16, or approximately 1.3158%.

The positive foreign-asset return did not produce a positive sterling return. Quote direction matters, and rounding the currency movement early can distort the answer. Keep full calculator precision until the final step.

Use every wrong answer to identify a specific error

After a practice paper, classify each mistake. Was it a missing definition, a wrong assumption, a reversed sign, a date mismatch, an incorrect unit or a calculation slip? “Revise taxation” is too broad to guide the next session. “I treated the personal allowance as available despite the stated income taper” gives you a precise task.

For a numerical question, rewrite the inputs and formula without looking at the explanation. For an advice question, identify the client’s objective, constraint and evidence. Explain why the strongest distractor fails. A signature does not cure unsuitable advice, a high return does not excuse a mandate breach, and low observed volatility does not by itself establish low economic risk.

Use study mode while learning a method, then complete a timed paper to assess selection and pacing. At 120 minutes for 80 scored questions, the average is 90 seconds each; straightforward questions should leave time for longer calculations. Review patterns across attempts rather than treating one score as a guarantee of exam performance.

Try the course before a full timed paper

The Exams Academy IRT course covers all eight chapters with 245 flashcards, 70 worked calculations and 400 practice questions across five mock exams. Every full-length practice paper contains 80 questions.

Start with the preview below, then use the free demo’s Formulas & Reference section to inspect complete worked methods. The full course connects the chapter explanations, formula practice and AI tutor to the same reviewed content, so you can move from a wrong answer to the underlying rule and a worked example.