The present value of a perpetuity is PVperpetuity paymentinterest PMTi With a

# The present value of a perpetuity is pvperpetuity

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-The present value of a perpetuity is: PV(perpetuity)= payment/interest (PMT/i) -With a financial calculator, enter each cash flow (beginning with the t = 0 cash flow) into the cash flow register, -----CFj, enter the appropriate interest rate, and then press the NPV key to obtain the PV of the cash flow stream. NFV = NPV(1 + I)N -Amortized Loans: With a financial calculator, enter N (number of years), I/YR (interest rate), PV (amount borrowed), and FV = 0, and then press the PMT key to find the periodic payment. Using a financial calculator, enter the following: N = 60, I/YR = 8/12, PV = -40000, and FV = 0. Solve for PMT = \$811.06. Ch.6 -The Determinants of Market Interest Rates The quoted (or nominal) interest rate on a debt security, r, is composed of a real risk-free rate of interest, r*, plus several premiums that reflect inflation (or inflation premium, IP), the security’s risk (or default risk premium, DRP), its liquidity (or marketability) premium (LP), and the years to maturity (or maturity risk premium, MRP): Quoted interest rate = r = r* + IP + DRP + LP+ MRP Ch.7 -Bond valuation: Here, we apply the Time Value of Money (TVM) concept from chapter 5. Using a financial calculator, enter N = 15, rd = I/YR = 10, PMT = 100, and FV = 1000, and then press ‘CPT’ PV. What you see on the

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• Spring '14
• DongY.Nyonna

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