Midterm 2 Formulas

Question 1

Marginal Propensity to Consume (MPC) formula

Answer 1

Change in consumption / change in income

Question 2

Savings formula

Answer 2

Income - Consumption

Question 3

Net Present Value (NPV) formula

Answer 3

PV of Benefits - PV of Costs

Question 4

Future Value (FV) formula

Answer 4

PV * (1 + r)^t

of

PV + r * PV

Question 5

Increase in FV ** ?

Answer 5

FV new deposit amount - Initial deposit amount

Question 6

Present Value (PV) formula

Answer 6

FV in t years * (1/(1+r)^t)

Question 7

This Year’s Revenue **

Answer 7

Last year’s revenue (1-d)

+ (1 + r)^t (for next year’s)

Question 8

User’s Cost of Capital formula

Answer 8

(r + d) * C

Question 9

Nominal Exchange Rate formula

Answer 9

Number of Another Currency / Number of Dollars (CAD)

CAD to Another = CAD * Nominal Exchange Rate

Another to CAD = Another / Nominal Exchange Rate

Question 10

Price-to-Book Ratio formula

Answer 10

Price per share / book value per share

Question 11

Price-to-Earning Ratio formula

Answer 11

Price per share / earnings per share

Question 12

Real Exchange Rate ** formula

Answer 12

Domestic price in $ / (Foreign price converted into $)

or

Domestic price in $ / (foreign price in foreign currency / nominal exchange rate)

Question 13

Current Account Deficit formula

Answer 13

-NX = C + I + G - Y