FINNS222: Investments

Quiz #S: Foimula Sheet

F0RN0LAS:

AccrucJ intcrscst =
Annuol coupon poymcnt
2

oys sincc lost coupon poymcnt
oys scporoting couponc poymcnts

In:oicc pricc = uotcJ pricc +AccrucJ intcrcst
Nomoniol rcturn =
Intcrcst + Pircc opprcciotion
Initiol pricc
; Rcol rcturn =
1 + Nominol rcturn
1 + Inlotion
-1
Hocouloy
i
s Jurotion () = 1 w
1
+ 2 w
2
+ S w
3
+ = t w
t
1
t=1
= t
CF
t
(1 + y)
t
BonJ pricc
1
t=1

HoJiicJ Jurotion (

) =

1+
;
HoJiicJ Jurotion o bonJ pricc scnsiti:ity _
P
P
] = _
(1 + y)
1 + y
_ = -

y
urotion o pcrpcturity =
1 + y
y

Cur:oturc o pricc - yiclJ rclotionsbip o bonJ _
P
P
] = -

y +
1
2
Con:cxity (y)
2

ExpcctcJ EolJing PcrioJ Rcturn(EPR) = E(r) =
E(
1
) + |E(P
1
) - P
0
]
P
0

Capital Asset Piicing Nouel (CAPN) r

= r
RP
+ [

(r
M
- r
RP
)
Currcnt iclJ =
onnuol coupon poymcnt
currcnt pricc

IH (iclJ to Hoturity) = Currcnt iclJ +Copitol 0oins iclJ
Total Retuin on a stock = capital gains yielu + uiviuenu yielu; Biviuenu yielu = B1Pu;
Capital uains Yielu = (P
1
P
u
)P
u;
Biviuenu payout iatio =1 plowback iatio;
uiowth iate (g) = plowback iatio (b)*(R0E); PE iatio=Piice Eainings;
i:iJcnJ Jiscount moJcl (H): P
0
=

0
(1 + g)
r
s
-g
=

1
r
s
- g