Formula sheet - Formula sheet 1 Present Value of an Annuity =[1(1 Present Value of a Growing Annuity =[1(1 1 Duration = where P is the price of the bond

Formula sheet - Formula sheet 1 Present Value of an Annuity...

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Formula sheet Present Value of an Annuity = ? 𝑟 [1 − 1 (1+𝑟) ? ] Present Value of a Growing Annuity = ? 𝑟−? [1 − ( 1+? 1+𝑟 ) ? ] Duration = ∑ 𝑃?(? ? )? 𝑃 , where P is the price of the bond Put-Call Parity: P + S = C + PV(K) Binomial Replication: Delta = ? ? −? 𝑑 𝑆 ? −𝑆 𝑑 B = ? 𝑑 −????𝑎𝑆 𝑑 1+𝑟 𝑓 C = Delta S + B SML: ?(𝑟 𝑖 ) = 𝑟 ? + 𝛽 𝑖 [?(𝑟 ? ) − 𝑟 ? ] where 𝛽 𝑖 = ???(𝑟 𝑖 ,𝑟 ? ) 𝜎 2 (𝑟 ? ) Expected return and Variance of a portfolio of three stocks: ?(𝑟 ? ) = ? 1 ?(𝑟 1 ) + ? 2 ?(𝑟 2 ) + ? 3 ?(𝑟 3 ) 𝜎 2 (𝑟 ? ) = ? 1 2 𝜎 2 (𝑟 1 ) + ? 2 2 𝜎 2 (𝑟 2 ) + ? 3 2 𝜎 2 (𝑟 3 ) + 2? 1 ? 2 𝑐𝑜?(𝑟

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