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Unformatted text preview: Formulas: Future value and present value: FV = PV & (1 + i ) n ; PV = FV (1 + i ) n Non-annual compounding and e/ective annual interest rate: FV = PV & & 1 + i m m & n ; Eff:Int:Rate = & 1 + i m m 1 Present value and future value of an (ordinary) annuity: PV = PMT & ( 1 1 (1+ i ) n i ) ; FV = PMT & (1 + i ) n 1 i PV (or FV) of Annuity Due: (1 + i ) & PV ( or FV ) of ordinary annuity : Present value of a perpetuity and a growing perpetuity: PV = PMT i ; PV = PMT i g Price of an n-period zero-coupon bond ( FV : face value; y : yield to maturity): P = FV (1 + y ) n Price of an n-period coupon bond ( PMT : coupon; FV : face value; y : yield to maturity): P = n X t =1 PMT (1 + y ) t ! + FV (1 + y ) n Market value of a stock ( ^ D t : expected amount of dividend at t ; r is the stock&s required rate of return): P = 1 X t =1 ^ D t (1 + r ) t : Gordon&s constant dividend growth model: P = ^ D 1 r g : Expected return on a portfolio, & R p : & R p = n X i =1 w i & & r i...
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