Finance test 2 cheat sheet-2

Finance test 2 cheat sheet-2 - Future value of multiple...

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Future value of multiple cash flows: NPV( Discount rate,yr0 CF, {CF1,CF2,CF3}, {FreqCF1, Freq cf2})* (1+Discount rate)^years Annuity Present value(pay equal payments) PV= C*([1-{1/(1+r)^t}]/r); Fv=C*({(1+r)^t-1}/r) PV perpetuity=C/r (eg. Preferred stock) r=Dividend/ price per share Growing annuity PV=C*{(1-((1+g)/(1+r))^t)/(r-g)} Growing perpetuity PV=C/(r-g) EAR={1+(Quoted rate/m)}^m – 1 or Eff( Nom APR, # periods) Continuous Compounding: EAR=e^q -1 APR: Nom(Eff, # periods) =Interest rate per period* # or periods per year Irr(Yr0 CF or pv, {CF1,CF2,,,CFN}) to calculate interest with uneven cash flow Interest-only Loans (borrower pays interest each period and pays the entire principle at one point in the future). Yr1-Y(n-1)=C*r, Yn=C*r+C Coupon rate=annual coupon/face value Current yield=a bond’s annual coupon*Fv/price=pmt/pv Yield to maturity(YTM) use TVM solver Price of bond: PV percentage of face value Bond value=C*[1-1/(1+r)^t]/r+F/(1+r)^t=PV coupons +PV face amount PMT->PV+ FV 1000-> PV
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This note was uploaded on 11/24/2011 for the course FINANCE 340 taught by Professor White during the Fall '11 term at Maryland.

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Finance test 2 cheat sheet-2 - Future value of multiple...

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