School of Administrative Studies Atkinson Faculty of Liberal and Professional Studies York University Toronto, Ontario, Canada ADMS 3530.03 Finance Midterm Formula Sheet Time Value of Money FV = Investment × (1 + r ) PV of a perpetuity = PV = n C r Future Value (1 + r )n PV of a growing perpetuity = 1  PV of an annuity = C ×  − n   r r (1 + r )  1 − (1 + r ) − n  = C×  r    (1 + r ) n − 1 FV of an annuity = C ×   r   (easier to calculate) 1  Annuity factor =  − n   r r (1 + r )   1 + g n  C PV (Growing Annuity) = × 1 −    r − g   + r   FV (Growing Annuity) = [ C n n × (1 + r ) − (1 + g ) r−g ] 1 − (1 + r ) − n  =   r   (lower version is easier to calculate) PV (Annuity Due) = PV(Simple Annuity) × (1+r) FV (Annuity Due) = FV (Simple Annuity) × (1+r) + Real rate = + Nomimal rate + Inflation rate APR = Period Rate × m EAR = (1 + Period Rate ) − m Period Rate = (1 + EAR ) m −     where m = number of periods per year    C r−g Bonds and Stocks Price of a bond = PV (Coupons) + PV (Face Value) 1  Face Value = C× − + n  (1 + r ) n  r r (1 + r )  Current yield = Annual Coupon payment Bond price Rate of return = Income + Capital gain or loss Initial price Dividend yield = Dividend payment Stock price Sustainable growth rate: g = ROE × Plowback ratio Dividend Discount Model: P0 = DIVH PH DIV1 DIV2 + + + + H + r (1 + r ) (1 + r ) (1 + r ) H where H is the horizon date, and PH is the expected price of the stock at date H Constant-Growth Dividend Discount Model: P0 = Expected Return Formula: r = DIV1 +g P0 DIV1 r−g r= or DIV1 P1 − P0 + P0 P0 ...Bonds and Stocks Price of a bond = PV (Coupons) + PV (Face Value) 1  Face Value = C× − + n  (1 + r ) n  r r (1 + r )  Current yield = Annual Coupon payment Bond price Rate of return = Income... ) (1 + r ) (1 + r ) H where H is the horizon date, and PH is the expected price of the stock at date H Constant-Growth Dividend Discount Model: P0 = Expected Return Formula: r = DIV1 +g P0 DIV1