The time value of Money.Discounted cash flow Applications.Statistical Concept and Market ReturnProbability Concepts.

Stated(Nominal) vs. Effective Annual Interest Rate

The stated rate of interest=the nominal rate=contractual rateEffective annual rate(EAR) is the rate of interest that investors actually realize as a result of compounding and may be determined as follows:Ahmedabad Wealth Management

EAR=(1+periodic rate)^m-1

where:

periodic rate=nominal rate/m

m=the number of compounding periods per yearAhmedabad Investment

计息周期越短越好，ear极限为e^stated rate-1

CFA(5)Agra Stock

Future Value(FV) of a Single Sum

FV=PV(1+1/Y)^N

---PV=amount of money invested today(the present value)

----1/Y=rate of return per compounding period

---N=total number of compounding periods

---FV=amount to whitch an investment grows to

Present Value(PV) of a single SumKolkata Stocks

PV=FV/(1+1/Y)^N

Ordinary Annuity(年金) and Annuity Due

Annuity: a series of equal cash flows that occur at evenly spaced intervals over time.Ordinary annuity: cash flows occur at the end of each time periodAnnuity due: cash flows occur at the beginning of each time periodPerpetuities: annuities with an infinite life.

Future Value of an Ordinary Annuity

FVAo=PMT*[(1+1/Y)^N-1]/(1/Y)

PMT:payment

Future Value of an Ordinary Annuity

FVAD=FVAO*(1+1/Y)

CFA(6)Udabur Stock

Present Value of an Ordinary Annuity

PVAO=PMT*{[1-1/(1=Y)^N]/(1/Y)}

PVAD=PVAO*(1+1/Y)PV of a perpetuityPVperpetuity=PMT/(1/Y)