Copyright11 Preliminary Version. Financial Maths Review Course – MSGP ESCP Europe (2011-2012) 1. Basic Tools in Financial Mathematics - Basic Tools in Financial Mathematics: • Compounding and future value (discrete and continuous compounded interest rates/rate of payments and receipts‚ which are spread over time. However‚ one Euro obtained (invested) today is not returns) • Discounting and present value (bond‚ stock and
Free Compound interest Time value of money Bond
of a perpetuity Appreciate the effects of compounding on interest rate quotations Understand how loans are amortized or paid off D.Chotee FTX2020F 2013 Readings Chapter 6: 6.1‚ 6.2‚ 6.3‚ 6.4 D.Chotee FTX2020F 2013 Recap: Future Values We know that FV = PV x (1+r)t (1+r)t is called the future value factor How to calculate? ◦ Calculator ◦ Tables Future value more significant over longer periods where more interest compounded. D.Chotee FTX2020F 2013 Recap: Present Values
Premium Compound interest Time value of money Net present value
deposited P6‚000 at the beginning of each month‚ for 2 years at his credit union. If the interest rate was 12% compounded monthly‚ what is the future value of Ferdie’s account? Solution : Interest rate per period and the number of compounding periods are first to be determined. One period is added to the total number of compounding periods. Interest rate per period = 1% ( 12% / 12 period per year )
Premium Time value of money Time Compound interest
2 Risk-Free Assets Case 2 Consider a do-it-yourself pension fund based on regular savings invested in a bank account attracting interest at 5% per annum. When you retire after 40 years‚ you want to receive a pension equal to 50% of your final salary and payable for 20 years. Your earnings are assumed to grow at 2% annually‚ and you want the pension payments to grow at the same rate. 2.1 Time Value of Money It is a fact of life that $100 to be received after one year is worth less than the
Premium Bond Compound interest Time value of money
returns the future value of a series of cash flows. =PMT(rate‚ nper‚ pv‚ fv‚ type) calculates the periodic payment for a loan based on constant payments and a constant interest rate. =NPER(rate‚ pmt‚ pv‚ fv‚ type) returns the number of periods for an investment based on periodic‚ constant payments and a constant interest rate. =NPV(rate‚ range) returns the net present value of an investment based on a discount rate and a series of future payments (negative values) and income (positive
Premium Net present value Rate of return Internal rate of return
Practice Exam Questions and Answers 1. The Widget Co. purchased new machinery three years ago for $4 million. The machinery can be sold to the Roman Co. today for $2 million. The Widget Co.’s current balance sheet shows net fixed assets of $2‚500‚000‚ current liabilities of $1‚375‚000‚ and net working capital of $725‚000. If all the current assets were liquidated today‚ the company would receive $1.9 million in cash. The book value of the Widget Co.’s assets today is _____ and the market value
Premium Time value of money Dividend yield Net present value
Question 1 .0.5 out of 0.5 points What is the future value of $1‚200 a year for 40 years at 8 percent interest? Assume annual compounding. Answer Selected Answer: c. $310‚868 Correct Answer: c. $310‚868 . Question 2 .0.5 out of 0.5 points Gerold invested $6‚200 in an account that pays 5 percent simple interest. How much money will he have at the end of ten years? Answer Selected Answer: b. $9‚300 Correct Answer: b. $9‚300 . Question 3 .0.5 out of
Premium Investment Insurance Compound interest
ITM Business School ITM University Scope and means to improve NIMs in comparison to other banks Internship report submitted to SBI in completion of the requirement of summer internship at State Bank of India Project mentor: Mr A. Raizada Student name: Neha Gupta APRIL 22 2013 TO JUNE 22 2013 CERTIFICATE OF COMPLETION This is to certify that the project
Premium Financial ratios Banking Interest
Nper | 4 | Pmt | 3900 | Pv | ($12‚362.48) | Fv | $0.00 | 6) Dottie has decided to set up an account that will pay her granddaughter (Lexi) $5‚000 a year indefinitely. How much should Dottie deposit in an account paying 8 percent annual interest? PV = 5000 / 0.08 = 62500 7) Calculate the present value of an annuity of $3‚900 each year for four years‚ assuming an opportunity cost of 10 percent. 8) Calculate the future value of an annuity of $5‚000 each year for eight years
Premium Time value of money Cash flow Rate of return
Identification and Recreation of Unknown White Compound #643p November 13‚ 2012 INTRODUCTION: The identity of the unknown solid white compound is determined and verified through a series of tests which uncover physical and chemical properties necessary for identification. A new sample of the same compound is then created to further prove the accuracy of the identification. The compound must be identified in order to be used. For example‚ KCl is used in medicine‚ scientific applications‚ and
Premium Chemistry Chemical substance Chemical compound