Semiannually Twice per year Quarterly Four times per year Monthly Twelve times per year Weekly Fifty two times per year Daily 365 (360 by banks) per year COMPOUND INTEREST FORMULA The amount A after t years due to a principal P invested at an annual interest rate r compounded n times per year is r A P 1 n nt A is commonly referred to as the accumulated value or future value of the account. P is called the present value. COMPOUND INTEREST Example: Investing $1000
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Compounding F J Answer: a EASY 3. A time line is meaningful even if all cash flows do not occur annually. a. True b. False (28.2) Compounding F J Answer: b EASY 4. A time line is not meaningful unless all cash flows occur annually. a. True b. False (28.2) Compounding F J Answer: a EASY 5. Time lines can be constructed in situations where some of the cash flows occur annually but others occur quarterly. a. True b. False (28.2) Compounding F J Answer: b EASY 6. Time lines cannot be constructed in
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QUANTITATIVE INVESTMENT ANALYSIS WORKBOOK Second Edition Richard A. DeFusco‚ CFA Dennis W. McLeavey‚ CFA Jerald E. Pinto‚ CFA David E. Runkle‚ CFA John Wiley & Sons‚ Inc. QUANTITATIVE INVESTMENT ANALYSIS WORKBOOK CFA Institute is the premier association for investment professionals around the world‚ with over 85‚000 members in 129 countries. Since 1963 the organization has developed and administered the renowned Chartered Financial Analyst Program. With a rich history of leading
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Fundamentals of corporate finance (European edition) by David Hillier Quartile 4 IBA Chapter 1 - 14 Chapter 1 Introduction to corporate finance 1.1 Corporate finance and the financial manager Corporate finance must be considered with three basic types of question: 1. What long-term investments to make 2. Where will we get the money for those investments from 3. How will we manage everyday financial activities 1. What long-term investment to make: To process of planning and
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interest-only loan? 6.4b What does it mean to amortize a loan? 6.4c What is a balloon payment? How do you determine its value? SUMMARY AND CONCLUSIONS This chapter rounds out your understanding of fundamental concepts related to the time value of money and discounted cash flow valuation. Several important topics were covered‚ including: 1. There are two ways of calculating present and future values when there are multiple cash flows. Both approaches are straightforward extensions of our earlier analysis of
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………5 Present Value…………………………………………………………………………...5 Analysis Illustrations……………………………………………………………………6 Conclusion………………………………………………………………………………7 References……………………………………………………………………………....9 The purchase of an automobile is a very important financial transaction one can make. Not only is a car an expensive purchase‚ it also comes with a cost of maintenance‚ repair‚ and once it is driven off the dealers lot‚ the vehicle becomes an investment that readily depreciates in value. Most buyer looking
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SEMESTER A 2015 CHAPTER 5 – EXERCISES P5–2 Future value calculation Without referring to the preprogrammed function on your financial calculator‚ use the basic formula for future value along with the given interest rate‚ r‚ and the number of periods‚ n‚ to calculate the future value of $1 in each of the cases shown in the following table. P5–4 Future values for each of the cases shown in the following table‚ calculate the future value of the single cash flow deposited today at the end of the
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All CFA Institute members and candidates are required to comply with the Code and Standards The CFA Institute Bylaws Basic structure for enforcing the Code and Standards primary principles Based on two Rules of Procedure Fair process to member and candidate Confidentiality of proceedings Maintains oversight and responsibility The CFA Institute Board of Governors Structure of the CFA Institute Professional Conduct Program Professional Conduct program (PCP) The CFA Designated Officer Through
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m& Practice Questions: Time Value of Money (TVM) & Its Applications in Investments 1. Jose now has $500. How much would he have after 6 years if he leaves it invested at 5.5% with annual compounding? a. $591.09 b. $622.20 c. $654.95 d. $689.42 e. $723.89 N 6 I/YR 5.5% PV $500 PMT $0 FV $689.42 2. How much would $5‚000 due in 25 years be worth today if the discount rate were 5.5%? a. $1‚067.95 b. $1‚124.16 c. $1‚183.33 d. $1‚245.61 e. $1‚311.17
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CHAPTER 2 How to Calculate Present Values Answers to Problem Sets 1. If the discount factor is .507‚ then .507*1.126 = $1 2. 125/139 = .899 3. PV = 374/(1.09)9 = 172.20 4. PV = 432/1.15 + 137/(1.152) + 797/(1.153) = 376 + 104 + 524 = $1‚003 5. FV = 100*1.158 = $305.90 6. NPV = -1‚548 + 138/.09 = -14.67 (cost today plus the present value of the perpetuity) 7. PV = 4/(.14-.04) = $40 8. a. PV = 1/.10 = $10 b. Since the perpetuity
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