School of Administrative Studies Atkinson Faculty of Liberal and Professional Studies York University Toronto, Ontario, Canada ADMS 3530.03 Finance Midterm Formula Sheet Time Value of Money FV = Investment × (1 + r ) PV of a perpetuity = PV = n C r Future Value (1 + r )n PV of a growing perpetuity = 1 PV of an annuity = C × − n r r (1 + r ) 1 − (1 + r ) − n = C× r (1 + r ) n − 1 FV of an annuity = C × r (easier to calculate) 1 Annuity factor = − n r r (1 + r ) 1 + g n C PV (Growing Annuity) = × 1 − r − g + r FV (Growing Annuity) = [ C n n × (1 + r ) − (1 + g ) r−g ] 1 − (1 + r ) − n = r (lower version is easier to calculate) PV (Annuity Due) = PV(Simple Annuity) × (1+r) FV (Annuity Due) = FV (Simple Annuity) × (1+r) + Real rate = + Nomimal rate + Inflation rate APR = Period Rate × m EAR = (1 + Period Rate ) − m Period Rate = (1 + EAR ) m − where m = number of periods per year C r−g Bonds and Stocks Price of a bond = PV (Coupons) + PV (Face Value) 1 Face Value = C× − + n (1 + r ) n r r (1 + r ) Current yield = Annual Coupon payment Bond price Rate of return = Income + Capital gain or loss Initial price Dividend yield = Dividend payment Stock price Sustainable growth rate: g = ROE × Plowback ratio Dividend Discount Model: P0 = DIVH PH DIV1 DIV2 + + + + H + r (1 + r ) (1 + r ) (1 + r ) H where H is the horizon date, and PH is the expected price of the stock at date H Constant-Growth Dividend Discount Model: P0 = Expected Return Formula: r = DIV1 +g P0 DIV1 r−g r= or DIV1 P1 − P0 + P0 P0 ...Bonds and Stocks Price of a bond = PV (Coupons) + PV (Face Value) 1 Face Value = C× − + n (1 + r ) n r r (1 + r ) Current yield = Annual Coupon payment Bond price Rate of return = Income... ) (1 + r ) (1 + r ) H where H is the horizon date, and PH is the expected price of the stock at date H Constant-Growth Dividend Discount Model: P0 = Expected Return Formula: r = DIV1 +g P0 DIV1