Exam II Cheat Sheet

Future Value FVn = PV(1 + i)n

Present Value PV = FVn [1/ (1 + i)n]

Log Equation for i: log(1 + i) = log(1 + i) = (ln FV – ln PV) / n;

i = [antilog of log(1+i)] - 1 Log Equation for n: n = (ln FV – ln PV) / [ln(1 + i )] Present Value of an Annuity = A{[1 - (1 / (1 + i)n )] / i}

Future Value of an Annuity = A{[(1 + i)n– 1] / i}

Future Value of an Annuity Due = A[{[(1 + i)n – 1] / i}(1 + i)]

Present Value of an Annuity Due = A[{[1 - (1 / (1 + i)n )] / i}(1 + i)]

Perpetuity P = A / i

Periodic Rate = Nominal Rate/m = i/m

Periodic Periods = mn

Effective Annual Rate (EAR = EFF%)

Tax CalculationsConvert Pre Tax Item to Post Tax………………....Pre Tax Item(1-tax rate)

Convert Post Tax Item to Pre Tax……………..…..Post Tax Item/(1-tax rate)

Rate of Indifference to Pre or Post Tax…………....1-(Post tax / Pre Tax)

Tax Saving or Shield from Pre Tax Expense…..….Pre Tax Item X Tax Rate

Bond Valuation n P0 = [I / (1 + kd )t ] + [M / (1 + kd )n ] t=1

AYM = {I + [(M –P) / N]} / [(P + M ) / 2]

Current Yield (CY) = (Annual Coupon Payment) / (Current Price)

Capital Gains Yield (CGY) = (Change in Price) / (Beginning Price)

Total Return = YTM = Current Yield + Capital Gains Yield

Semi-Annual Bonds AYM = {(I/m) + [(M –P) / Nm]} / [(P + M ) / 2]

Semi-Annual Bond’s EFF% = [ 1 + (RNOM / m)]m

Yield to Call (AYC) = {I /m + [(CP-P) / Nm]} / [( P + CP) / 2]Where m = number of period before callable

Holding Period Return = Cash Flow Yield + Capital Gains Yield nExpected Returns = HPR = E(R) = pi Ri t=1

Portfolio Beta for an Equally-Weighted Two-Stock Portfolio bp = wAB bAB + wXY bXY n

Calculating Standard Deviation =[((r – r)2 Pi )]1/2

i=1 nMean of Historical Data ( rt ) / n t=1

Standard Deviation of Historical n

= [(r – r)2 / (n - 1)]1/2

i=1

Calculating Portfolio Expected Return n

rp = wi ri i=1