5 - Time Value of money

Question 1

Compound interest formulae

Answer 1

FV = PV (1+r)^n

FV = future value
PV = present value
r = IR
N = years

Question 2

Effective annual rate (EAR) formuale

Answer 2

EAR = (1+r/n)^n -1

Question 3

What is EAR used for

Answer 3

loans and deposits

Question 4

What is APR or AER

Answer 4

Similiar to EAR
APR used for loans
AER deposits
same formulae

Question 5

How to calculate Accumulation and discounting

Answer 5

FV = P((1+r)^n)-1)/r))
P = regular payment

Question 6

Accumulation with an extra period formulae

Answer 6

FV with extra period

FV = P((1+r)^n -1)/r) -1))

Question 7

Formulae for discounted cash flow

Answer 7

PV = FV/(1+r)^n

Question 8

Annuity formulae

Answer 8

A = P ((1-(1+r)^-n)/r))

Question 9

What is annuity used for?

Answer 9

Future value of series of payment plus interest

Question 10

Real Return formulae

Answer 10

RReal = Rnom - Rinf

Rreal = real return
RNom = nominal return
RINF - inflation rate