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ECON 10:24 EQN

# ECON 10:24 EQN - FV = PV(1 r)T PV = FV(1 r)T FV = future...

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Unformatted text preview: FV = PV(1 + r )T PV = FV/(1 + r )T FV = future value PV = present value r = annual rate of return T = number of years m = number of times the interest is compounded per year The future value (FV) of the investment m*T r FV = PV 1 + ÷ m Expected return of an event E(RA ) = N ∑p i =1 i R Ai pi is the probability of event i happening. RAi is the return of asset/project A if event i occur E(RA) is the expected return of asset/project A N = number of all possible events Expected return = [ Probability of Event 1 * Return in Event 1] + [ Probability of Event 2 * Return in Event 2] + …for all possible events… Variance return for an event VAR ( R A ) = N ∑p i =1 Standard deviation of Return SD( R A ) = VAR ( R A ) i ( R Ai −E ( R A )) 2 Expected Return of portfolio = [ (wA) * (Expected ReturnA) ] + [ (wB) * (Expected ReturnB) ] +…for all assets/projects - wA and wB …is the fraction of portfolio allocated to A, B etc. Covariance between the returns of two events N Cov ( R A , R B ) = ∑ pi ( R Ai −E ( R A ))( R Bi − E ( RB )) i =1 pi is the probability of event i happening. RAi is the return of asset/project A if event i occur RBi is the is the return of asset/project B if event i occur E(RA) is the expected return of asset/project A E(RB) is the expected return of asset/project B N = number of all possible events Value of a share today = PV of any dividends the stock will pay + PV of the price you get when you re-sell the share ...
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ECON 10:24 EQN - FV = PV(1 r)T PV = FV(1 r)T FV = future...

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