# All Semester 1 Maths Formulas (Weeks 1-10) (Still on Week 6) Flashcards

How do we calculate Future Value? (WEEK 4: Time Value of Money)

FV = PV(1+R)n

How do we calculate Present Value? (WEEK 4: Time Value of Money)

PV = FV/(1+R)n

OR

PV = FV X 1/(1+R)n

where n is to the power of

What is the calculation for the Future Value when we consider differing time period payments (i.e monthly, quarterly etc.) (WEEK 4: Time Value of Money)

FV = PV (1+R/M)txm

txm is to the power of

Where:

R is annual interest

M number of compound periods per annum

t number of years

What is the calculation for FV and PV when we are looking at continuous compounding?(WEEK 4: Time Value of Money)

FV= PV e (txr)

Where t x r is to the power of

PV = FV e (-t x r)

Where - t x r is to the power

How do you calculate the effective interest rate(EAR)? (WEEK 4: Time Value of Money)

(1+r/m)(m) - 1

Where m is to the power of

How do you calculate Perpetuity? (Present Value of things that may go indefinitely) (WEEK 4: Time Value of Money)

Formula given as:

PV = C/R

Where C is cashflow/coupon

How do you calculate the Ordinary Annuity? (Things that pay you for a fixed number of time) (WEEK 4: Time Value of Money)

PV = C/R (1- 1/(1+R)t)

Where t is to the power of

How do you find the cashflow in an Ordinary Annuity? (Used to calculate Mortgage repayments) (WEEK 4: Time Value of Money)

C = PV x R/ 1 - (1/1+R) t

Where T is to the power of

Jusr rearranging the Ordinary Annuity

How do you calculate the Ordinary Annuity for the future (FV)? (WEEK 4: Time Value of Money)

FV = C/R x ((1+R)t - 1)

Where t is to the power of

How do you calculate the Holding Period Return? (WEEK 4: TIME VALUE OF MONEY)

r = (D1 +P1 - P0)/ P0

Where:

P0: Denotes value of investment at beginning of holding period

P1: Denotes value of investment at end of holding period

D1: Denotes dividend or interest payment received during that period

How do you calculate the nominal rate of return? (WEEK 4: TIME VALUE OF MONEY)

Real rate of return x Inflation

e.g Real rate of Return = 8%

Inflation 4% (add it on to the existing 100%)

Looking at T0: £1000

- 08 X 1.04 = 1.1232
- 1232 X 100 = 1123.20 Nominal Cash flow T1
- 20 is financially equal to 1000 in the last period

Can see the nominal rate of return is 12.32%

what is the Ex-ante nominal interest rate? (WEEK 4: TIME VALUE OF MONEY)

Rt ≈ r + Eπ

what is the Ex-POST nominal interest rate? (WEEK 4: TIME VALUE OF MONEY)

R ≈ r + π

How do you calculate Perpetual Bonds? (WEEK 5: BONDS)

PV = C/R

Where:

- PV: Present Value of bond

- C: The coupon rate x Nominal (par) value of the bond

Works the same for regular PV where C is just the Cashflow

How you calculate conventional bonds? (Bonds that have fixed payback period) (WEEK 5: BONDS)

PV =

PV(P) = C(1/R-1/(1+R)t) + V/(1+R)t

Where V is the par value

Where t is to the power of