RSM332H1 Study Guide - Midterm Guide: General Motors Ev1, Net Present Value, Spot Contract
Document Summary
Annuity: cash flow starts at time 1 and lasts for t periods; annuity factor: ; constant annuity: ; growing annuity at g: ; fv of ordinary annuity: ; Sum of geometric series (a, a2, a3, ) with lal<1: s=a+a2+a3+ +an, -as=-a2-a3- -an+1; then (1-a)s=a-an+1 and s=(a-an+1)/(1-a) Mortgage loan: in canada, quoted as annualized semi-annual rate, compounding monthly (monthly payment). Principal payment starts as smaller portion of total payment and grows over time: outstanding principal (just after a payment is made) = pv of all remaining payments . Perpetuity: cash flow starts at t=1 and last forever; constant perpetuity: ; growing perpetuity at g: for r>g. Sum of geometric series (1, a, a2, a3, ) with lal<1: s=1+a+a2+a3+ , -as=-a-a2-a3- ; then (1-a)s=1 and s=1/(1-a) Bond: pure discount bond: ytm = spot rate; bond traded at par (at face value): ytm = coupon rate; ytm=r=discount rate=required ror.
