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Formula Sheet - PDF For Week 10

This document contains formulas for calculating present and future values using simple and compound interest, effective annual rates, annuities, perpetuities, bond pricing, dividend valuation models, and more. Some key formulas include the Fisher equation for calculating real interest rates, the future and present value formulas for a single payment with simple and compound interest, and the constant growth dividend discount model for valuing stocks based on expected future dividend payments and growth rate.

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Nat Siow
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156 views2 pages

Formula Sheet - PDF For Week 10

This document contains formulas for calculating present and future values using simple and compound interest, effective annual rates, annuities, perpetuities, bond pricing, dividend valuation models, and more. Some key formulas include the Fisher equation for calculating real interest rates, the future and present value formulas for a single payment with simple and compound interest, and the constant growth dividend discount model for valuing stocks based on expected future dividend payments and growth rate.

Uploaded by

Nat Siow
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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ICT Formula Sheet

Description Formula

Fisher equation (Exact or Precise) Real rate = (1 + i ) / (1 + ∆Pe ) – 1


(Approximate) Real rate ≈ i - ∆Pe

Future Value (simple interest) FVn = PV0 ∗ (1 + i ∗n)

PV0 = FVn / (1+i)


n
Present value single amount (compound interest)

FVn = PV0 * (1+i)


n
Future value single amount (compound interest)

Future value (compounding more frequently than once


per period)
FVn = PV0 * (1 + i / m) (m * n)

m
 j
EAR  1    1 where j = quoted rate
Effective Annual Rate  m

 1 
1  (1  i ) n 
Present value of an ordinary annuity PVAn  CF   
 i 
 
 
 1 
1  (1  i) n 
Present value of an annuity due PVA Due,n  CF   1  i ) 
 i 
 
 

 (1  i) n  1
Future value of an ordinary annuity FVAn  CF   
 i 

 (1  i ) n  1
Future value of an annuity due FVA Due, n  CF   1  i 
 i 

𝐶𝐹
Present value of a perpetuity 𝑃𝑉0 =
𝑖
𝐶𝐹1
Present value of a growing perpetuity 𝑃𝑉0 =
(𝑖 − 𝑔)

 1 
1  (1  i ) n  F
Price of a bond BP0  C   
 (1  i )
n
 i
 
 1 
1  (1  i/m ) mn  F
Price of a bond making multiple payments per year BP0  C / m   
 i/m  (1  i/m ) mn
 
 
Price of Bond = Fmn/(1 + i/m)mn
Price of a zero coupon bond
(with pricing based on m compounding periods per year)

Equivalent Annual Yield (EAY) EAY = (1 + Quoted rate/m)m - 1

∞
𝐷𝑡
General dividend valuation model 𝑃0 = ∑
(1 + 𝑅)𝑡
𝑡=1

D
Value of share – zero growth P0 
R

Value of share using Constant growth dividend discount D1 D 1  g 


P0   0
model (DDM) Rg Rg

Value of share time t using Constant growth dividend Dt 1


Pt 
discount model (DDM) Rg

Dt  D0 1  g 
t
Dividend at time t, based on constant growth, g

Value of share using mixed (supernormal/multistage) 𝐷1 𝐷2 𝐷𝑡 𝑃𝑡


𝑃0 = 1
+ 2
+ ⋯+ 𝑡
+
growth model (1 + 𝑅) (1 + 𝑅) (1 + 𝑅) (1 + 𝑅)𝑡

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