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equation sheet

equation sheet - KEY EQUAT[O\JS hx/l-i,5 J_’:5 ’ij(if...

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Unformatted text preview: KEY EQUAT [O\JS hx/l -i' ,5 J _’%:5 ’ij (if; i‘JIJE} EDI-iirb iff’ta‘le/f \$16 We Nor lov'u’Ui Laol/L‘Y : «LAO/1 ; W {H29 Chanterﬁ _ “ :7 CHAPTER 5 1. The future value of \$1 invested for t periods at rate of :- per period: Future value = \$1 X (1 + r)’ [5.1] 2.. The present value of \$1 to be received I periods in the future at a discount rate of r. W = \$1 >< {1/(1+ r)'] = Slim + r)’ [5.21 3. The relationahio bemeen future value and present . value (the basic present value equation): Wxa+ry= W: [53] P‘V— ﬂ/(1+r)‘=WX[I/(1+r)ﬂ CHAPTER 6 1. The present value of an annuity of C dollars per period for r periods when the rate of return or interest rate is r: Annuity presemvalue a C x (1 - Presentrvalue factor) = c x [Kw—1 [51} 2. The future value factor for an annuity: Annuity FV factor 7- (Fumre value factor — 1)/ r [6.21 = LU + r)‘ .. ll/r 3. Annuity due value = Ordinary annuity value X [1 4- r) ‘ - [6.31 4. Present value for a perpetuity: PV foraperpemity = C/r = C X (lfr) [6.4] 5. Effective annual rate (EAR), where m is the number of times the interest is compounded during the year: EAR : [1 Jr (Quoted rate/min” ﬂ 1 [5-5} 6. EffectiVe annual rate (EARL where q stands for the continuously compounded quoted rate: EAR“ —— e" — 1 [5.6] Additional equations for_chapter S and 6 Chapter 5 1/:— interest rate: 'r— — (152% Time period: t.= in (ED/in [1 + 1') Payment in annuity c = We x [M] 2 PM“ [(17:33] (1+r)'—1 Future vaiue of annuity rm = Err: + r)= - 1} .a Present value of growing perpetuity C " PVGP .—_ ———- T '— g =_ Present value of growing annuity C (1+9): .1. PVC —r—-gX[1"—(1+r)‘ CHAPTER 7 . . , 2-» 1. Bond value if bond has (1) a face value of F paid at maturity. (2) a coupon of C paid per period. (3) 1‘ periods to FEE-311ml and (4) a yield of :- per period: ' ' Bond value , =C><{1—1/(1+r)’]/r+F/(l+r)‘ [7.1] Bond value 1;, Present Value + Present value — of the coupons of the face amount . i 2. The Fisher effect: 3 1+R=(1+r)><(1+h) [7.2] . R=r+h+r><h [7.31 I 7 Rﬁ=r+h [141 CHAPTER 8 1. Tue dividend growth model: -Dox'(1+8)_ Di _ _ R _ g _ F? [3.3] :_ 2. Required return: R = rat/Pu + g [85] ‘ CHAPTER 12 : l. Variance of returns, Var(R) or cr‘: vane) = Twin—1m! —R)1 + . -- + {RT " R33} [123] 1. Standard deviation of returns1 SDUE) or 0‘. SD(R} = VariR) ...
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