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21 Cards in this Set
- Front
- Back
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Future Value of a single cash flow - You have $PV invested in an investment earning r%, what is the future vlue |
FV = PV(1+r) |
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Future value of a single cash flow - you have $PV, earning r% compounded for n eriods |
FV = PV(1+r)^N |
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Future value - non-annual compounding: you have $PV invested at r% componded for m times a period for N periods |
FV = PV(1+(r/m))^mN |
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Future value - continuous compounding: you haeve $PV invested at r% continously for N eriods |
FV = PVe^(r*N) |
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Effective annual rate - you have an investment earning a periodic interest rate for m periods a year - what is the effective annual rate |
EAR = (1+periodic interestrate)^m - 1 |
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Effective annual rate - you have a continuously compounded investment at r%, what is the effective annual rate |
EAR = e^r - 1 |
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Future value - ordinary annuity - you have an annuity amount of A, paying for N periods and there is an interest rate of r |
FV = A[(1+r)N-1)/r) |
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Future value - annuities with equal cash flows |
FV = PV(1+r)^N Due to the different sized payments, you need to do this manually. |
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Present value of a future single cash flow - you have FV after investing at r% for N periods |
PV = FV(1+r)^-N |
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Present value of a non-annually compounded future value: You have a future value after investing a PV at r% compounding at m periods for N years |
PV = FV(1+(r/m))^-mN |
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Present value of a series of equal cash flows - you will receive A every year for N periods, the interest rate is r% |
PV = A[(1-(1/(1+r)N))/r |
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Present value of a series of unequal cash flows - you recieve a varying amount each year, earning r% |
PV =FV(1+r%)^-N You need to do each manually |
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Present value of a perpetuity - what is the present value of a perpetuity if it pays A a year, at r% |
PV = A/r |
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Present value of a perpetuity paying at t=/=0 - what is the PV of a perpetuity paying A at t=4, at r% |
1. Work out the future value - FV = A/r 2. Work back from T = 4: PV = FV(1+r)^-N |
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Solving for interest rates and growth rates - a deposit at $PV will pay off $FV in N periods, what is the interest rate |
growth rate = ((FV/PV)^1/N) - 1 |
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Solving for interest rates - finding growth rates across a period e.g. PV grew to PV across N periods, what is the growth rate (g)? |
g = (FV/PN)^(1/N) - 1 |
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Probabilities - odds of an event happening |
P(E)/(1-P(e)) |
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Probabilities - Odds against an event happening (E) |
(1-(P(E))/P(E) |
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Probabilities - Odds that A happens, given that B happens |
P(A|B)= P(AB)/P(B) e.g. if B happens 50% of the time (0.5), A and B happen 10% of the time (0.1) P(A|B) = 0.1/0.5 = 0.2 |
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Probability - Multiplication rule - if B happens 20% of the time, A given B happens 20% of the time - what is the chance of A and B happening |
P(AB) = P(A|B)*P(B) = 0.2*0.5=0.1 |
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Probability - addition rule e.g. given events A and B, what is the probability that A or B occurs? |
P(A or B) = P(A)+P(B)-P(AB) |
