Содержание
- 2. Interest rate The interest rate, r, is required rate of return; r is also called the
- 3. Annuity An annuity is a finite set of level sequential cash flows. There are two types
- 4. Future value/Present value
- 5. Future Value/Present Value of an Ordinary Annuity *FVAn- future value for an ordinary annuity *PVAn- present
- 6. Perpetual annuities(PV annuities with infinite lives) It is not uncommon to have applications in investments and
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Interest rate
The interest rate, r, is required rate of return; r
Interest rate
The interest rate, r, is required rate of return; r
is also called the discount rate or opportunity cost.
The required rate of return on a security = real risk-free rate + expected inflation + default risk premium + liquidity premium + maturity risk premium.
The interest rate, r, makes current and future currency amounts equivalent based on their time value.
The stated annual interest rate is a quoted interest rate that does not account for compounding within the year.
The periodic rate is the quoted interest rate per period; it equals the stated annual interest rate divided by the number of compounding periods per year.
The effective annual rate is the amount by which a unit of currency will grow in a year with interest on interest included.
For non-annual time value of money problems, divide the stated annual interest rate by the number of compounding periods per year, m, and multiply the number of years by the number of compounding periods per year.
The required rate of return on a security = real risk-free rate + expected inflation + default risk premium + liquidity premium + maturity risk premium.
The interest rate, r, makes current and future currency amounts equivalent based on their time value.
The stated annual interest rate is a quoted interest rate that does not account for compounding within the year.
The periodic rate is the quoted interest rate per period; it equals the stated annual interest rate divided by the number of compounding periods per year.
The effective annual rate is the amount by which a unit of currency will grow in a year with interest on interest included.
For non-annual time value of money problems, divide the stated annual interest rate by the number of compounding periods per year, m, and multiply the number of years by the number of compounding periods per year.
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Annuity
An annuity is a finite set of level sequential cash flows.
There
Annuity
An annuity is a finite set of level sequential cash flows.
There
are two types of annuities, the annuity due and the ordinary annuity. The annuity due has a first cash flow that occurs immediately; the ordinary annuity has a first cash flow that occurs one period from the present (indexed at t = 1).
On a time line, we can index the present as 0 and then display equally spaced hash marks to represent a number of periods into the future. This representation allows us to index how many periods away each cash flow will be paid.
Annuities may be handled in a similar fashion as single payments if we use annuity factors instead of single-payment factors.
On a time line, we can index the present as 0 and then display equally spaced hash marks to represent a number of periods into the future. This representation allows us to index how many periods away each cash flow will be paid.
Annuities may be handled in a similar fashion as single payments if we use annuity factors instead of single-payment factors.
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Future value/Present value
Future value/Present value
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Future Value/Present Value of an Ordinary Annuity
*FVAn- future value for an
Future Value/Present Value of an Ordinary Annuity
*FVAn- future value for an
ordinary annuity
*PVAn- present value for an ordinary annuity
*PVAn- present value for an ordinary annuity
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Perpetual annuities(PV annuities with infinite lives)
It is not uncommon to have
Perpetual annuities(PV annuities with infinite lives)
It is not uncommon to have
applications in investments and corporate finance where it is necessary to evaluate a cash flow stream that is not equal from period to period.
PV and FV of Uneven Cash Flow series