#Loan Ammortization table

year Amount Annuity Interest Repayment Balance

1 1000000 298312 150000 148312 851688
2 851688 298312 127753.2 170558.8 681129.2
3 681129.2 298312 102169.4 196142.62 484986.6
4 484986.6 298312 72747.99 225564.013 259422.6
5 259422.6 298312 38913.39 259398.615 23.95205

c)
9.1
 8.1
assumed
a) return 10 Overall return Probability ER
High 100 1000 0.3 300
Low 110 1100 0.4 440
Stag 120 1200 0.2 240
Recess 140 1400 0.1 140
Total 1120

pi(Ri - ER)^2 4320

160
1280
7840
Total 13600 Variance
116.6190379 Std

b) return 10 Overall return Probability ER

High 150 1500 0.3 450
Low 130 1300 0.4 520
Stag 90 900 0.2 180
Recess 60 600 0.1 60
Total 1210

pi(Ri - ER)^2 25230

3240
19220
37210
Total 84900 Variance
291.37605 Std

Return return Shares Overall return Probability ER

High 100 150 5 1250 0.3 375
Low 110 130 5 1200 0.4 480
Stag 120 90 5 1050 0.2 210
Recess 140 60 5 1000 0.1 100
ER Tot 1165

pi(Ri - ER)^2 2167.5

490
2645
2722.5
Total 8025 Variance
89.582364 Std
nature prob R1 R2 deviation 1 deviation 2 prod dev 1 and 2
1 0.1 5 0 -8 -13 9.75
2 0.3 10 8 -3 -5 3.75
3 0.5 15 18 3 5 6.25
4 0.1 20 26 8 13 9.75
29.5 Cov
mean 12.5 13

Coeff of cov 0.99771 STD

Deviation 1 * proDeviation 2 *prob
5.625 17
1.875 8
3.125 13
5.625 17
16.3 54

4.03112887415 7.33484832836
Q1 n (years) 8
C 12%
M 100
r or Yeild 14%

Q1 writrten differently Settlement 1/1/2022

(Solved Example page 7.5) Maturity 12/30/2029 As it is 8 years
C 12%
Redemption/par value 100
r/yeild 14%
Frequency 2 As it is semi annual
Basis 3 (Day count convention, Actual No. of days/365)

Ans (price or B0 or P) = 90.55 No need to mention basis

Q2 Settlement 1/1/2022
(Solved example 7.4) Maturity 12/30/2031
C 12%
Redemption/par value 1000
r/yeild 13%
Frequency 1
Basis 3

Ans (price of the bond) = ₹ 945.74

Solved Examples

Q) 7.1 M ₹ 100.00
C 12%
n 5
pmt 12
r 15%

Answer (Value of the bond is ) 89.94

Q) 7.2 M 1000 1/1/2022

C 14% 12/31/2026
n 5
P 1050
Pmt or annuity 140

Yield @ 13% 1035.172 Since this value is lower than 1050, we will try a new value of r (1
Yield @12% 1072.10
YTM 12.60%

YTM using Rate -12.2%

Q) 7.3 M / Par 100

C 14%
n 5
Frequency 2
r (required) 16%
pmt 14

P ( bond Value) ₹ 93.29 Remember for semi annual , Rate, pmt and C is divided by 2 where

Divident Price Interest Divident Val

7.5 D1 2 1.18 2.36
D2 1.18 2.78
D3 1.18 3.29
D4 1.18 3.88
D5 1.12 4.34
D6 1.12 4.86
D7 1.12 5.45
D8 1.12 6.10
ntion, Actual No. of days/365)

Settlement
Maturity

50, we will try a new value of r (13% is assumed) so we'll take a lower value for r for a greater value of YTM
pmt and C is divided by 2 where as n is multiplied by 2

Div, PV Rate
2.05 15% 1.15
2.11
2.16
2.22
2.16
2.10
2.05
1.99
16.84 Total
6.1 A 5000
r 9%
n 75

FV ₹ 3,205,954.5

6.3 r 16%
CompoundiQuarterly

6.4 A 5000
r 14%
n 15

Fv ₹ 219,212.07

6.5 FV 44650
n 5
A 6000

Rate 20%

6.6 FV 1000000
n 60
r 10%

PV ₹ 3,284.3

6.7 A 10000
n 12 7
r 14%

PV ₹ 56,602.92 PV a year before first payment that is 7 years from now

PV ₹ 22,620.64

6.8 r 14%

Year 0 1 2 3
CFs 5000 6000 8000 9000

NPV` ₹ 23,886.21

6.9 PV 200000
n 15
r 10%
 A ₹ 26,294.76

#6.10 FV 1000000
A 80,000
r 14%

NPER 7.72047872039122

6.11 PV 80000
r 1.25%
n 12

PMT(A) ₹ 7,221

Loan Amortization Table

Month Beginning Amount Monthly Installment Interest Principal Repayment

1 80000 ₹ 7,221 ₹ 1,000.00 ₹ 6,220.66
2 ₹ 73,779 ₹ 7,221 ₹ 922.24 ₹ 6,298.42
3 ₹ 67,481 ₹ 7,221 ₹ 843.51 ₹ 6,377.15
4 ₹ 61,104 ₹ 7,221 ₹ 763.80 ₹ 6,456.87
5 ₹ 54,647 ₹ 7,221 ₹ 683.09 ₹ 6,537.58
6 ₹ 48,109 ₹ 7,221 ₹ 601.37 ₹ 6,619.30
7 ₹ 41,490 ₹ 7,221 ₹ 518.63 ₹ 6,702.04
8 ₹ 34,788 ₹ 7,221 ₹ 434.85 ₹ 6,785.82
9 ₹ 28,002 ₹ 7,221 ₹ 350.03 ₹ 6,870.64
10 ₹ 21,132 ₹ 7,221 ₹ 264.14 ₹ 6,956.52
11 ₹ 14,175 ₹ 7,221 ₹ 177.19 ₹ 7,043.48
12 ₹ 7,132 ₹ 7,221 ₹ 89.14 ₹ 7,132

Problems

6.1 n 5 5 5
pv 1000 1000 1000
r 8% 10% 15%
v
FV ₹ 1,469.33 ₹ 1,610.51 ₹ 2,011.36

6.2 NPER 30.5812768709985

6.3 Rate 18.9%

6.4 A 2000
n 5
A 3000
n 10

r 10%

FV n=5 12210.20
FV n=10 ₹ 31,670.11

FV ₹ 47,812.27
TFV = 79482.39
 4
8000
 Remaining Balance
₹ 73,779
₹ 67,481
₹ 61,104
₹ 54,647
₹ 48,109
₹ 41,490
₹ 34,788
₹ 28,002
₹ 21,132
₹ 14,175
₹ 7,132
₹0

ms
 p R pR R-Er (R-E)^2 p*(R-E)^2
b 0.3 16 4.8 4.5 20.25 6.075
n 0.5 11 5.5 -0.5 0.25 0.125 S 3.5
r 0.2 6 1.2 -5.5 30.25 6.05
Er 11.5 S^2 12.25

corr cov/s1.s2 cov= beta

2stage A(1+g)

S^2 Sq(w1.s1)+sq(w2.s2)+2w1.w2.cov(a,b).s1.s2
get square root of the above equation to get risk of portfolio

check C200 Formulas

two stage model

year divident g1 discount rate pv
1 4.4 1.2 4.4 1.14 3.859649
2 4.4 1.2 5.28 1.14 4.062789
3 4.4 1.2 6.336 1.14 4.27662 300.8152 (present value of divident(
4 4.4 1.2 7.6032 1.14 4.501705 $81.14 (present value of divident(
5 4.4 1.2 9.12384 1.14 4.738637
6 4.4 1.2 10.94861 1.14 4.988039
7 4.4 1.2 13.13833 1.14 5.250567
8 4.4 1.2 15.766 1.14 5.526912
9 4.4 1.2 18.91919 1.14 5.817803
10 4.4 1.2 22.70303 1.14 6.124003 $130.29 (adding both the values)
49.14672
 Cov (Ri-Er)(Rj-Er)/n-1

pmt(A)
PV
fva a[(1+r)^n-1]/r FV
Pva a[(1+r)^n-1]/r(1+r)^n Rate
EAR [1+APR/m]^m nper(period)
Npv
Irr npv=0
[1-(1+g)^n/(1+r)^n]/r-g $ (100,000.00)
-15% $ 30,000.00
15.0% $ 30,000.00
$ 40,000.00
$ 45,000.00

(present value of divident(growing at 6%) at year 10)

(present value of divident(growing at 6%) at year 0)

(adding both the values)

 Yr 0 yr1 yr2 yr3 yr4

Initial Investment -440

Net Initial WC -20
Sale of old machine 30

Revenue 204.50 244.80 311.40 375.60

Op Ex. 87.94 107.71 140.13 161.51

EBITDA 116.57 137.09 171.27 214.09

Old Dep&Amort 15.00 11.25 8.44 6.33

New DEP&Amort 110.00 82.50 61.88 46.41
Increase in Dep&Amort 95.00 71.25 53.44 40.08
EBIT 21.56 65.84 117.83 174.01

Tax 5.43 16.59 29.69 43.85

PAT 16.13 49.25 88.14 130.16

PAT+Dep.+Amort. 111.13 120.50 141.58 170.24

NWC 20.45 24.48 31.14 37.56

Change in NWC 0.45 4.03 6.66 6.42

Operating Cashflows 110.68 116.47 134.92 163.82

Salvage
Old
new
Inc in Salvage

Recovery of NWC

Net Cashflows -430 110.68 116.47 134.92 163.82

NPV
MarketReturn 13.2%
Risk Free return 7.05%
Ke(Cost of Equity Capi 16.2%
NPV 38.59
IRR 19.56%
yr5

New Machine
Book Value Beginning
yr1 440.00
yr2 330.00
yr3 247.50
320.20 yr4 185.63
yr5 139.22
147.29

172.91 Old Machine

4.75 Book Value Beginning

34.80 yr1 60.00
30.06 yr2 45.00
142.85 yr3 33.75
yr4 25.31
36.00 yr5 18.98

106.85

136.91

32.02

-5.54

142.45

18.8
100.00
81.20

12.81

236.46
New Machine
Dep and Amort Book Value End
110.00 330.00
82.50 247.50
61.88 185.63
46.41 139.22
34.80 104.41

Old Machine

Dep and Amort Book Value End

15.00 45.00
11.25 33.75
8.44 25.31
6.33 18.98
4.75 14.24
Year CF PVF @12% PV of in flows
1 7.6 0.89 6.7857142857143
2 7.6 0.80 6.0586734693878
3 7.6 0.71 5.4095298833819
4 7.6 0.64 4.8299373958767
5 8.5 0.57 4.8231282736081
6 8.5 0.51 4.3063645300072
7 8.5 0.45 3.8449683303636
8 8.5 0.40 3.4330074378246
9 8.5 0.36 3.0651852123434
10 8.5 0.32 2.7367725110209
Total 45.29

year balance
0 39.60
1 29.70 Total profit 46.40829
2 22.28
3 16.71 net profit 6.81
4 12.53
5 9.40
6 7.05
7 5.29 As the net profit is positive, it is favourable to invest.
8 3.96
9 2.97
10 2.23
favourable to invest.
loan amount 46.35
period 8
rate 18%

₹ 11.37

Loan amortization table

Year Loan at beginning installment int paid principle paid loan end of year Tax saving @ 3
1 46.35 ₹ 11.37 8.343 ₹ 3.02 ₹ 43.33 2.92
2 ₹ 43.33 ₹ 11.37 7.799 ₹ 3.57 ₹ 39.76 2.73
3 ₹ 39.76 ₹ 11.37 7.156 ₹ 4.21 ₹ 35.55 2.50
4 ₹ 35.55 ₹ 11.37 6.398 ₹ 4.97 ₹ 30.58 2.24
5 ₹ 30.58 ₹ 11.37 5.504 ₹ 5.86 ₹ 24.72 1.93
6 ₹ 24.72 ₹ 11.37 4.449 ₹ 6.92 ₹ 17.80 1.56
7 ₹ 17.80 ₹ 11.37 3.203 ₹ 8.16 ₹ 9.63 1.12
8 ₹ 9.63 ₹ 11.37 1.734 ₹ 9.63 ₹ 0.00 0.61

P v of all tax savings in project 2 10.62

true cost 35.73
Tax saving @ 35%
pv factor pv
0.892857 2.607187
0.797194 2.175967
0.71178 1.782813
0.635518 1.42321
0.567427 1.093104
0.506631 0.788851
0.452349 0.507172
0.403883 0.245111

10.62342
loan amt 14
installment 5.32
period 4
implied rate 19.14%

The investor is fooling us by saying the rate of intrest is 14 but in actuality it is 19%
 Yr 0 yr1 yr2 yr3 yr4

Initial Investment -440

Net Initial WC -20
Sale of old machine 30

Revenue 204.50 244.80 311.40 375.60

Op Ex. 87.94 107.71 140.13 161.51

EBITDA 116.57 137.09 171.27 214.09

Old Dep&Amort 15.00 11.25 8.44 6.33

New DEP&Amort 110.00 82.50 61.88 46.41
Increase in Dep&Amort 95.00 71.25 53.44 40.08
EBIT 21.56 65.84 117.83 174.01

Tax 5.43 16.59 29.69 43.85

PAT 16.13 49.25 88.14 130.16

PAT+Dep.+Amort. 111.13 120.50 141.58 170.24

NWC 20.45 24.48 31.14 37.56

Change in NWC 0.45 4.03 6.66 6.42

Operating Cashflows 110.68 116.47 134.92 163.82

Salvage
Old
new
Inc in Salvage

Recovery of NWC

Net Cashflows -430 110.68 116.47 134.92 163.82

NPV
MarketReturn 13.2%
Risk Free return 7.05%
Ke(Cost of Equity Capi 16.2%
NPV 38.59
IRR 19.56%
yr5

New Machine
Book Value Beginning
yr1 440.00
yr2 330.00
yr3 247.50
320.20 yr4 185.63
yr5 139.22
147.29

172.91 Old Machine

4.75 Book Value Beginning

34.80 yr1 60.00
30.06 yr2 45.00
142.85 yr3 33.75
yr4 25.31
36.00 yr5 18.98

106.85

136.91

32.02

-5.54

142.45

18.8
100.00
81.20

12.81

236.46
New Machine
Dep and Amort Book Value End
110.00 330.00
82.50 247.50
61.88 185.63
46.41 139.22
34.80 104.41

Old Machine

Dep and Amort Book Value End

15.00 45.00
11.25 33.75
8.44 25.31
6.33 18.98
4.75 14.24
 MRF vs MARICO vs NIFTY
Adjusted Closing Price Adjusted Closing Price
MRF YoY Return
(MRF India) (Marico India)

Mar-12 9936.80 87.25

Mar-13 11992.60 106.12 21%
Mar-14 21739.00 104.80 81%
Mar-15 38809.95 193.53 79%
Mar-16 38368.50 242.50 -1%
Mar-17 60723.85 294.35 58%
Mar-18 72300.70 326.10 19%
Mar-19 58056.30 345.25 -20%
Mar-20 58241.65 274.85 0%
Mar-21 82218.70 411.50 41%
Mar-22 64973.35 503.65 -21%
Mar-23 84046.95 479.70 29%

CHECKING THE PARAMETERS

Parameters * ** MRF
Average Annual Return 26.08%
Standard Deviation 35.87%
CAGR(Geometric Mean) 19%
Covariance
Correaltion

RISK AND RETURN ON PORTFOLIO

Portfolios Invest in MRF Invest in Marico Portfoilo Return
1 5% 95% 15.47%
2 15% 85% 15.89%
3 20% 80% 16.10%

4 35% 65% 16.74%

5 45% 55% 17.16%

6 55% 45% 17.58%
7 65% 35% 18.00%
8 75% 25% 18.42%
9 85% 15% 18.84%
10 95% 5% 19.26%
 EFFICIENT FRONTIER

25.00%

20.00%

15.00%

Risk
10.00%

5.00%

0.00%
24.00% 26.00% 28.00% 30.00% 32.00% 34.00% 36
Return
O vs NIFTY

Maric YoY Return Adjusted Closing Price(NIFTY 50) NIFTY Return

5295.55
22% 5682.55 7%
-1% 6704.2 18%
85% 8491 27%
25% 7738.4 -9%
21% 9173.75 19%
11% 10113.7 10%
6% 11623.9 15%
-20% 8597.75 -26%
50% 14690.7 71%
22% 17464.75 19%
-5% 17359.75 -1%

ARAMETERS
Marico *** NIFTY
19.58% 13.63%
28.43% 24.19%
15% 10.40%
0.04
0.40

ON PORTFOLIO
Variance Standard Deviation Column1
0.07717 27.78%
0.07178 26.79%
0.07004 26.47%
BEST PORTFOLIO
AND MINIMUM
0.06863 26.20%
VARIANCE
PORTFOLIO
0.07087 26.62%
0.07566 27.51%
0.08298 28.81%
0.09285 30.47%
0.10526 32.44%
0.12021 34.67%
2.00% 34.00% 36.00%
Future Buy Future Sell Call Buy

Put Buy
Call Sell

Put Sell