PART 1: MATHS OF FINANCE 1
REVISIOON OF TIME VALUE OF MO NEY
• Investment = certain amount of money moves forwards
• Discount = certain amount of money moves backwards
SIMPLE VS COMPOUND INTEREST RATE INVESTMENT
• Simple = lineal = 𝐹𝑉 = 𝑃𝑉(1 + 𝑟𝑡)
• Compound = exponential = 𝐹𝑉 = 𝑃𝑉(1 + 𝑟)𝑡
WITH PERIODICITY
r t·f
FV = PV (1 + )
f
• Semesterly basis: 2 times per y (f=2)
• Quarterly basis: 4 times per y (f=4)
• Montly basis: 12 times per y (f=12)
FV = PV · er·t
! continuously basis: 12 times per y (f=12)
AER = annual equivalent rate
, PART 2: MATHS OF FINANCE 2
CONSTANT IMMEDIATE ANNUITIES
= how much you should invest today in order to get a certain amount of payments for next year
REVISIOON OF TIME VALUE OF MO NEY
• Investment = certain amount of money moves forwards
• Discount = certain amount of money moves backwards
SIMPLE VS COMPOUND INTEREST RATE INVESTMENT
• Simple = lineal = 𝐹𝑉 = 𝑃𝑉(1 + 𝑟𝑡)
• Compound = exponential = 𝐹𝑉 = 𝑃𝑉(1 + 𝑟)𝑡
WITH PERIODICITY
r t·f
FV = PV (1 + )
f
• Semesterly basis: 2 times per y (f=2)
• Quarterly basis: 4 times per y (f=4)
• Montly basis: 12 times per y (f=12)
FV = PV · er·t
! continuously basis: 12 times per y (f=12)
AER = annual equivalent rate
, PART 2: MATHS OF FINANCE 2
CONSTANT IMMEDIATE ANNUITIES
= how much you should invest today in order to get a certain amount of payments for next year
