公司金融课件 3 T Value II.docVIP

-------------------------------------------------------- Home work: (1) Read: P88-91 (2)Exercise: You are to receive $1,000 per month for 25 years. Interest is compounded monthly. The present value of this annuity is $155,206.86. What is the stated or quoted monthly rate? What is the EAR? -------------------------------------------------------- EXAMPLE 1 A preferred stock has a $7.50 dividend in perpetuity and the interest rate is 6.9%. What is the value of the preferred stock? PVperpetuity = C/r = 7.50/.069 Price of the preferred stock = $108.70 GROWING PERPETUITY An annuity in which the cash flow continues forever, but grows at a constant rate of “g” per year. The stream of income looks like: PV0 = C1 + C1(1+g) + C1(1+g)2 +… 1 + r (1+r)2 (1+r)3 Fortunately, there is an easier way to present and calculate this value. PVgrowing perpetuity = C1_ r – g FVt = PV * ( 1 + r )t PV = FVt * ___1____ ( 1 + r )t PVA(r,t) = C * 1 – (1/(1 + r)t) r FVA(r,t) = C * ( 1 + r )t - 1 r PVperpetuity = C r PV growing perpetuity = __C1_ r – g WHAT IS THE INTEREST RATE? You will soon be borrowing a large sum to start your own business. You need to get the lowest possible rate. Your banker offers the following 5 choices: 7.75% compounded daily 7.75% compounded weekly 7.75% compounded monthly 7.75% compounded quarterly 8 % compounded annually WHICH OPTION DO YOU PREFER? STATED or QUOTED INTEREST RATE the interest rate expressed in terms of the interest payment made each period. EFFECTIVE ANNUAL RATE: EAR: the interest rate expressed as if it were compounded once per year. EAR = ( 1 + QR/m)m – 1 Where: QR= quoted rate per year m = number of times compounded per year. Your banker offers 5 choices: 7.75% compounded daily = 8.057 7.75% compounded weekly = 8.052 7.75% compounded monthly = 8.031 7.75% compounded quarterly = 7.978 8 % compounded annu