'Principles of Banking and Finance\r'

'Principles of Banking and finance: atomic number 53 Cashflow 1. Present protect (PV) * the value on a apt(p) date of a payment or series of payments made at other(a) ages (past or future) * Discounting from the future * encourage at t=0 on a given time lineage (â€Å"t” is the period, ranging from 0 to n where â€Å"n” being the last-place period). * Net Present cheer (NPV): PV after deducting both the cost 2. Future Value (FV) * The amount of money to which a specific total and /or series of payments leave alone grow on a given date in the future * Compounding (interests upon interests) Value at t>0 on a given time line Single Cashflow: expressions FV = PV(1 + i)t PV = FV / (1+i)t i = (FV / PV)1/t †1 Effective wager vagabond * Effective (Annual) Interest regulate (EIR) * The interest account convey as if it were compounded at a time a year. * Used to correspond two alternative investments with variant compounding periods * Does not emb arrass any fees incurred as give of the bestow package * nominal or Quoted Annual Interest Rate (NIR) * (periodic rate) x (number of periods per year) The rate unremarkably quoted in the bestow agreement * All-in Rate * NIR that includes all the fees incurred as part of the loan package Formulas: Uneven Cashflow horizontal Cashflow * Annuity †series of peer payments (â€Å"PMT”) that occur at fixity intervals for a period of time (â€Å"t”). * Payment is normally made at the depot of the period. For payment occurs at the startle of the period, it is Annuity Due. Perpetuity †uncounted series of equal payments Formula: Annuities Formula: Perpetuities When n > ? , PV (Perpetuity) = PMT/i\r\n'