QM1_Time value of Money

Effective annual rate(EAR)

For discrete compounding

Where: m is the compounding frequency

............. r is the noinal/quoted/stated annual interest rate

............. r/m is periodic interest rate

For continuous compounding

时时刻刻分分秒秒在计息.

例: 算名义年利率是8%, 求连续计算情形下的EAR.

....计算器按法: 0.08 --> 2ND --> LN ==>结果: 1.083287

Conversion of PV/FV

Present Value (PV)

The value of an initial investment.

Future Value (FV)

The value of an initial investment would be worth n period from today.

Conversion of PV/FV:

compounding:

continuous compounding:

站在今天去推测未来会价值几何: PV --> FV : 复利

站在未来推测今天需要存入多少: FV --> PV :折现

Annuity

Ordinary annuity

all constant cash flows occuring at the end of each period(END), 后付年金

Annuity due

all constant cash flows occuring at the beginning of each period(BEG), 先付年金

Prepetuity

a set of constant never-ending sequential cash flows occuring at the end of each period, 永续年金

PV = A/R

where A: the periodic payment

......r: the periodic return