16. Financial Mathematics Flashcards
1
Q
What is the calculation for APR?
A
APR = (1+r)^n - 1 where n is the number of periods in the year, and r is the interest rate per period
2
Q
What is the calculation for a present value of a future amount?
A
S x (1/(1+r)^n)
3
Q
What is the discount factor?
A
1/((1+r)^n)
4
Q
What is an annuity?
A
An investment that generates a constant return
5
Q
What is the calculation for the PV of an annuity, of X per period?
A
PV = (X/r) * (1 - discount factor)
6
Q
What is the calculation for the terminal value of an annuity?
A
X x ((1+r)^n -1) / r )
7
Q
What is the calculation for the present value of a perpetuity?
A
PV = X x 1/r
8
Q
When is the first payment assumed to take place in a perpetuity?
A
In one period’s time - if now, add X
