Fin 3080 Prof Xin Li Week 5 Notes
Fin 3080 Prof Xin Li Week 5 Notes FIN 3080C
Popular in Business Finance
verified elite notetaker
Popular in Finance
This 1 page Class Notes was uploaded by Brady Zuver on Thursday September 22, 2016. The Class Notes belongs to FIN 3080C at University of Cincinnati taught by Xin Li in Fall 2016. Since its upload, it has received 4 views. For similar materials see Business Finance in Finance at University of Cincinnati.
Reviews for Fin 3080 Prof Xin Li Week 5 Notes
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 09/22/16
FIN 3080 Prof Xin Li Week 5 Notes Chapter 6 1. Valuing level CFs: Annuities and Perpetuities a. Annuity: Any level stream of CFs for a fixed period of time i. A series of constant or level CFs that occur at the end of each period for a number of fixed periods ii. Annuity Present Value = 1 1− t 1−Present ValueFactor [1+r ) C∗ ( r )∨C∗( r ) 1. C is the constant (annuity value or single cash flow) iii. Higher interest rate, lower annuity present value factors iv. Annuity Future Value = (Future Value Factor -1)/r 1. FV Factor= (1+r)t b. Annuity due: An annuity for which the CF occur at the beginning of the period i. Ex. Leasing an apartment, first payment due immediately ii. Calculate normal annuity value, then multiply by 1+rate 1. Annuity Due Value = Ordinary annuity value * (1+r) c. Perpetuity: Annuity in which CFs continue forever i. PV for a perpetuity= C/r 2. Growing Annuities and perpetuities a. Annuities that commonly have payments grow over time 1+g t 1−[1+r b. Growing Annuity PV = C∗( ) r−g C c. Growing Perpetuity PV= r−g 3. Compounding Rates: The Effects of Compounding a. Effective annual Rates (EAR) i. The rate you will earn m ii. EAR = [1+(Quoted Rate/m)] -1 1. M= number of times interest is compounded over the year iii. Annual Percentage Rate (APR) 1. Interest Rates per period times number of periods per year a. Need to calculate EAR to see what is actually being paid
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'