罗斯公司理财Chap004.ppt

So, investing at 12.36% compounded annually is the same as investing at 12% compounded semi-annually. Find the Effective Annual Rate (EAR) of an 18% APR loan that is compounded monthly. What we have is a loan with a monthly interest rate rate of 1?%. This is equivalent to a loan with an annual interest rate of 19.56%. The general formula for the future value of an investment compounded continuously over many periods can be written as: FV = C0×erT Where C0 is cash flow at date 0, r is the stated annual interest rate, T is the number of years, and e is a constant that is approximately equal to 2.718. ex is a key on your calculator. Perpetuity A constant stream of cash flows that lasts forever Growing perpetuity A stream of cash flows that grows at a constant rate forever Annuity A stream of constant cash flows that lasts for a fixed number of periods Growing annuity A stream of cash flows that grows at a constant rate for a fixed number of periods A constant stream of cash flows that lasts forever 0 … 1 C 2 C 3 C What is the value of a British consol that promises to pay ￡15 every year for ever? The interest rate is 10%. 0 … 1 ￡15 2 ￡15 3 ￡15 A growing stream of cash flows that lasts forever 0 … 1 C 2 C×(1+g) 3 C ×(1+g)2 The expected dividend next year is $1.30, and dividends are expected to grow at 5% forever. If the discount rate is 10%, what is the value of this promised dividend stream? 0 … 1 $1.30 2 $1.30×(1.05) 3 $1.30 ×(1.05)2 A constant stream of cash flows with a fixed maturity 0 1 C 2 C 3 C T C If you can afford a $400 monthly car payment, how much car can you afford if interest rates are 7% on 36-month loans? 0 1 $400 2 $400 3 $400 36 $400 * What is the present value of a four-year annuity of $100 per year that makes its first payment two years from today if the discount rate is 9%? 0 1 2 3 4 5 $100 $100 $100 $100 $323.97 $297.22 A growing stream of cash flows with a fixed matu