Formula sheet

FV = PV(1 + r)t

PV = FV / (1 + r)t

1 1 
PV = C  − t 
 r r (1 + r ) 
 (1 + r ) t − 1
FV = C  
 r 

Annuity PV = C/r

PV of a Growing Annuity = C/r-g

When interest is compounded more than once a year.

mt
 r
FV = PV 1 + 
 m

𝑖 𝑛
𝑟 = (1 + ) − 1
𝑛

Fisher equation (1 + R) = (1 + r)(1 + h)

Bond price
T
Ct P
= +
(1 + r ) (1 + r )
t T
t =1

Calculating the YTM of a bond

Dividend discount model

 ◼

Case 1 no growth

Case 2 constant growth

Case 3 non constant growth

Div1 Div 2 Div H PH

P0 = + + ... + +
(1 + r )1 (1 + r ) 2 (1 + r ) H (1 + r ) H

Equity rate of return

𝑁𝑃𝑉
Profitability index = 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡

𝑆𝑢𝑚 𝑜𝑓 𝑎𝑙𝑙 ℎ𝑖𝑡𝑜𝑟𝑖𝑐 𝑟𝑒𝑡𝑢𝑟𝑛𝑠

Average return = 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑦𝑒𝑎𝑟𝑠

Expected risk

∑(𝑅𝑖 − 𝑅̅)2
𝜎=√
𝑛