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    Finance 3000 Midterm2 Formula Sheet: October 28, 2015

    Uploaded by

    Jack Jacinto
    This document provides formulas for calculating: 1) Present and future value of single and annuity cash flows, including ordinary annuities, annuities due, and perpetuities. 2) Total return, holding period return, required return on an investment, expected return of a portfolio, coefficient of variation, standard deviation of a single asset and portfolio. 3) CAPM required return, portfolio beta, standard deviation of a two asset portfolio, current and taxable equivalent yield, and conversion calculations for convertible bonds.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Finance 3000 Midterm2 Formula Sheet: October 28, 2015

    Uploaded by

    Jack Jacinto
    22 views2 pages
    This document provides formulas for calculating: 1) Present and future value of single and annuity cash flows, including ordinary annuities, annuities due, and perpetuities. 2) Total return, holding period return, required return on an investment, expected return of a portfolio, coefficient of variation, standard deviation of a single asset and portfolio. 3) CAPM required return, portfolio beta, standard deviation of a two asset portfolio, current and taxable equivalent yield, and conversion calculations for convertible bonds.

    Original Description:

    FORMULA

    Original Title

    Formula Sheet Mid2

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    This document provides formulas for calculating: 1) Present and future value of single and annuity cash flows, including ordinary annuities, annuities due, and perpetuities. 2) Total return, holding period return, required return on an investment, expected return of a portfolio, coefficient of variation, standard deviation of a single asset and portfolio. 3) CAPM required return, portfolio beta, standard deviation of a two asset portfolio, current and taxable equivalent yield, and conversion calculations for convertible bonds.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    22 views2 pages

    Finance 3000 Midterm2 Formula Sheet: October 28, 2015

    Uploaded by

    Jack Jacinto
    This document provides formulas for calculating: 1) Present and future value of single and annuity cash flows, including ordinary annuities, annuities due, and perpetuities. 2) Total return, holding period return, required return on an investment, expected return of a portfolio, coefficient of variation, standard deviation of a single asset and portfolio. 3) CAPM required return, portfolio beta, standard deviation of a two asset portfolio, current and taxable equivalent yield, and conversion calculations for convertible bonds.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    Finance 3000 midterm2 Formula sheet

    October 28, 2015


    Single cash flow:
    i mn
    )
    m
    1
    PV = FV
    (1 + mi )mn
    i
    EAR = (1 + )m 1
    m
    F V = P V (1 +

    (Ordinary) annuities:
    F V = P MT [
    P V = P MT [

    i mn
    )
    m
    i
    m
    1
    (1+i/m)mn

    (1 +
    1

    i/m

    Annuities due:
    F V = P MT [
    P V = P MT [

    i mn
    )
    m
    i
    m
    1
    (1+i/m)mn

    (1 +
    1

    i/m

    ] (1 + i/m)

    ] (1 + i/m)

    Perpetuities
    P MT
    i
    P MTperiod1
    Growth perpetuities: P V =
    ig
    Level perpetuities: P V =

    Total Return = Income during period + Capital Gain (or loss) during period
    HPR=Total Return/Beginning investment value
    Required return on investment j = real rate of return+ expected inflation premium +Risk
    premium for investment j=Risk-free rate + Risk premium for investment j
    Expected return of a portfolio: E(rp ) = E(r1 ) w1 + E(r2 ) w2 + ... + E(rn ) wn
    Coefficient of Variation: CV=Standard Deviation of Return/Mean Return
    Standard deviation of a single asset:
    v
    v
    u n
    uX
    n
    uX
    u
    2
    u
    u
    (Return for outcome t Average or expected return)
    (rt r)2
    u
    t
    t t=1
    t=1
    =
    =
    n1
    n1
    CAPM: Required return on investment j
    = Risk-free rate + [Beta for investment j*(Expected market return Risk-free rate)]
    Portfolio Beta: p = 1 w1 + 2 w2 + ... + n wn p
    Standard deviation of a portfolio of two assets: p = w12 12 + w22 22 + 2w1w2 1,2 1 2
    Current yield=Annual interest income/Current market price of the bond
    Taxable equivalent yield for Federal taxes=Yield on bond/(1-Federal tax rate)
    Taxable equivalent yield for both Federal and State=
    Conversion
    Conversion
    Conversion
    Conversion
    Conversion

    Yield on bond
    (1-Federal tax rate)(1-State tax rate)

    price=Par value of bond/Conversion ratio


    equivalent=Current market price of the convertible bond/Conversion ratio
    value=Conversion ratio*Current market price of the stock
    premium(in $)=Current market price of the convertible bond-Conversion value
    premium(in %)=Conversion premium(in $)/Conversion value

    Payback period =

    Conversion premium(in $)
    Annual interest from convertible bond-Annual dividend from common stock

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