assignment 3
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1. Mixed Cash Flow Present Value: Formula: PV = Σ [CFt / (1 + r)^t]. Used to find the
present value of uneven cash flows discounted individually.
2. Annuity Present Value (Ordinary): Formula: PV = C * [(1 - (1 + r)^-t) / r]. Used for
equal payments made at the END of each period.
3. Annuity Future Value: Formula: FV = C * [((1 + r)^t - 1) / r]. Used to find the future
value of equal payments.
4. Deferred Annuity Present Value: Step 1: Find PV at start of payments using
ordinary annuity formula. Step 2: Discount back: PV0 = PVn / (1 + r)^n. Used when payments
begin in the future.
5. Perpetuity Present Value: Formula: PV = C / r. Used for payments that continue
forever.
6. Annuity Due Present Value: Formula: PV (Ordinary) * (1 + r). Used when payments
begin TODAY (beginning of period).
7. Effective Annual Rate (EAR): Formula: EAR = [1 + (APR / m)]^m - 1. True annual
rate including compounding.
8. Fisher Equation: Formula: (1 + Nominal) = (1 + Real) * (1 + Inflation). Approximation:
Nominal HR e a l + Inflation.
9. Bond Pricing (Semiannual): Formula: Price = [C/2 * PVA factor] + [Par / (1 +
r/2)^(2t)]. Divide coupon and rate by 2; multiply years by 2.
10. Zero-Coupon Bond Price: Formula: PV = Par / (1 + r)^n. Present value of a
bond with no coupon payments.
11. Implicit Interest (Bond Amortization): Formula: Ending Bond Value -
Beginning Bond Value. Interest expense recognized each period.
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Study online at
1. Mixed Cash Flow Present Value: Formula: PV = Σ [CFt / (1 + r)^t]. Used to find the
present value of uneven cash flows discounted individually.
2. Annuity Present Value (Ordinary): Formula: PV = C * [(1 - (1 + r)^-t) / r]. Used for
equal payments made at the END of each period.
3. Annuity Future Value: Formula: FV = C * [((1 + r)^t - 1) / r]. Used to find the future
value of equal payments.
4. Deferred Annuity Present Value: Step 1: Find PV at start of payments using
ordinary annuity formula. Step 2: Discount back: PV0 = PVn / (1 + r)^n. Used when payments
begin in the future.
5. Perpetuity Present Value: Formula: PV = C / r. Used for payments that continue
forever.
6. Annuity Due Present Value: Formula: PV (Ordinary) * (1 + r). Used when payments
begin TODAY (beginning of period).
7. Effective Annual Rate (EAR): Formula: EAR = [1 + (APR / m)]^m - 1. True annual
rate including compounding.
8. Fisher Equation: Formula: (1 + Nominal) = (1 + Real) * (1 + Inflation). Approximation:
Nominal HR e a l + Inflation.
9. Bond Pricing (Semiannual): Formula: Price = [C/2 * PVA factor] + [Par / (1 +
r/2)^(2t)]. Divide coupon and rate by 2; multiply years by 2.
10. Zero-Coupon Bond Price: Formula: PV = Par / (1 + r)^n. Present value of a
bond with no coupon payments.
11. Implicit Interest (Bond Amortization): Formula: Ending Bond Value -
Beginning Bond Value. Interest expense recognized each period.
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