Finance Equations (2).pdf - The classic equation = 2 5 9 =...

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The classic equation ࠵?࠵?࠵? = ࠵?࠵?࠵?࠵?࠵? − ࠵?࠵?࠵?࠵?࠵?࠵?࠵?࠵? ࠵?࠵?࠵? = ࠵? / + ࠵? 2 1 + ࠵? + ࠵? 5 (1 + ࠵?) 5 + ⋯ + ࠵? 9 (1 + ࠵?) 9 ࠵?࠵?࠵? = ࠵?࠵?࠵?࠵?࠵? ࠵?࠵? + ࠵?࠵?࠵?࠵? − ࠵?࠵?࠵?࠵?࠵? − ∆࠵?࠵?࠵? ࠵?࠵?࠵? = ࠵?࠵?࠵?࠵? 1 − ࠵? + ࠵?࠵?࠵?࠵? − ࠵?࠵?࠵?࠵?࠵? − ∆࠵?࠵?࠵? ࠵?࠵?࠵?࠵?࠵? ࠵?࠵? = ࠵?࠵?࠵? − ࠵?࠵?࠵?࠵?࠵? − ࠵?࠵?࠵?࠵? ∆࠵?࠵?࠵? = ࠵?࠵?࠵?࠵?࠵?࠵?࠵? ࠵?࠵?࠵?࠵?࠵? − ࠵?࠵?࠵?࠵?࠵?࠵?࠵? ࠵?࠵?࠵?࠵? = ࠵?࠵?࠵?ℎ + ࠵?࠵?࠵? + ࠵?࠵?࠵?࠵?࠵?࠵?࠵?࠵?࠵?࠵? − ࠵?࠵?࠵?࠵?࠵?࠵?࠵?࠵? To Value Bonds and Loans ࠵?࠵?࠵? = ࠵? / + ࠵? 2 ࠵? [1 − 1 1 + ࠵? 9 ] Regular Annuity ࠵? QRSTU VW SVR9 VX YV9Z [VZR\ R]R ^ _ = ࠵? 2 ࠵? [1 − 1 1 + ࠵? 9 ] Growing Annuity ࠵? QRSTU VW SVR9 VX YV9Z [VZR\ R]R ^ _ = ࠵? 2 ࠵? − ࠵? [1 − 1 + ࠵? 1 + ࠵? 9 ] Price of Bond 1 + ࠵?࠵?࠵? = (1 + ࠵? bV9[cS\ ) 25 ࠵? YV9Z = ࠵?࠵?࠵? ࠵? 1 − 1 1 + ࠵? 9 + ࠵?࠵? (1 + ࠵?) 9 ࠵? = ࠵?࠵?࠵? ℎ࠵?࠵?࠵? Zero Coupon Bond ࠵?࠵?࠵? = ࠵?࠵?࠵? ࠵?࠵?࠵?࠵? ∗ ࠵?࠵? # ࠵?࠵? ࠵?࠵?࠵? ࠵?࠵?࠵?࠵?࠵?࠵?࠵?࠵? ࠵?࠵?࠵? ࠵?࠵?࠵?࠵? ࠵? YV9Z = ^ g 2hi + ^ j (2hi) j + ⋯ + ^ k 2hi k + lQ 2hi k ࠵? = ࠵?࠵?࠵?࠵? ࠵?࠵?࠵?࠵?࠵?࠵? ࠵?࠵?࠵?࠵?࠵?
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If bond is trading at a discount: YTM > CPN rate If bond is trading at premium: YTM < CPN rate If bond is trading at par: YTM = CPN rate To Value Stocks and Equity ࠵?࠵?࠵? = ࠵?
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  • Fall '08
  • Dietrich

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