Pv of perpetuity - Study guides, Class notes & Summaries
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CFA Level 1 - Quantitative Methods Questions and Answers Solved Correctly
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Default Risk - Risk that a borrower will not make promised payments 
Liquidity Risk - Risk of recieving less than fair value for an investment if it must be sold for cash 
quickly 
Required Interest Rate on A Security - = Nominal Interest Rate 
+ Default Risk Premium 
+ Liquidity Premium 
+ Maturity Risk Premium 
Real Risk Free Rate / Nominal Risk Free Rate - - Single period interest rate for a completely riskfree security with no inflation added 
- Nominal = Real Risk Free Rate + Expected Infla...
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FINC 3331 Chapter 5 – 8 Final Exam Prep Questions Correctly Answered.
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FINC 3331 Chapter 5 – 8 Final Exam Prep Questions Correctly Answered. 
 
 
Annuity pays $2,500 at end of year for 3 years. You could earn 5.5% on your money in other investments that have equal risk. What is the most you should pay for the annuity?? - CORRECT ANSWER Payment = $2,500 
Interest/year = 5.5% (or .055) 
N (years) = 3 
 
(2500/(1+0.055)) + (2500/ (1+0.055)^2) + (2500/(1+0.055)^3) 
 
= $6,744.83 
 
What is present value of a perpetuity that pays $250 per year if the appropriate inte...
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FINC 3610 Exam 2 Qs&As
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FINC 3610 Exam 2 Qs&As 
Annuity - Answer-Finite series of equal payments that 
occur at regular interval 
Perpetuity - Answer-Infinite series of equal payments 
Ordinary Annuity - Answer-If the first payment occurs at the end of the period 
Annuity Due - Answer-If the first payment occurs at the beginning of the 
period 
Perpetuity Formula - Answer-PV = C / r 
Annuity Formulas - Answer-PV = C [( 1 - 1/(1+r)^t) / r] or PV = C [(1+r)^t - 1) /r ] 
Annuity Due Formula - Answer-Multiply answer by (1+...
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Valuation Methods- DCF Review Questions and Correct Answers
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Discounted Cash Flow analysis intrinsic method of valuation 
Based on the present value of the company's future cash flows 
Concept is based on the going concern principle in accounting that firms are expected to operate into perpetuity 
Firm total enterprise value = PV of FCFS + PV of terminal value, both discounted using WACC 
PV of fcfs, discounted using WACC + PV of Terminal Value, discounted using WACC = Implied Total Enterprise Value today 
FOUR major steps in performing a DCF analysis: 1...
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ADVENTIS FMC LEVEL 2 WITH 100% CORRECT ANSWERS
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what is value 
what people are willing to pay for (what the buyer pays) 
 
 
 
who said, "Value is what people are willing to pay for" 
John Naisbitt 
 
 
 
 
Brainpower 
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2 primary types of valuation 
1. relative valuation 
2. intrinsic valuation 
 
 
 
relative valuation refers to what 
methods that compare the price of a company to the market value of similar assets 
 
 
 
intrins...
And that's how you make extra money
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CFA Level 1 Formulas Question And Answer.
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Price change based on convexity correct answer - -duration(change in yield)+1/2(convexity)(change in yield)^2 
 
Effective Duration correct answer - Required if a bond has embedded options: [(v-)-(v+)]/[2V0(change in curve)] 
 
Modified Duration correct answer - [(v-)-(v+)]/[2V0(change in yield)] 
 
Future Value correct answer - PV(1+(I/Y)^N) 
 
PV correct answer - FV/(1+r)^n 
 
PV of perpetuity correct answer - PMT / discount rate 
 
Approximate percentage price change of a bond correct answer ...
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CFA Level 1 Formulas| 245 Questions | With Complete Solutions
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Price change based on convexity correct answer: -duration(change in yield)+1/2(convexity)(change in yield)^2 
 
Effective Duration correct answer: Required if a bond has embedded options: [(v-)-(v+)]/[2V0(change in curve)] 
 
Modified Duration correct answer: [(v-)-(v+)]/[2V0(change in yield)] 
 
Future Value correct answer: PV(1+(I/Y)^N) 
 
PV correct answer: FV/(1+r)^n 
 
PV of perpetuity correct answer: PMT / discount rate 
 
Approximate percentage price change of a bond correct answer:...
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DCF Valuation Modeling Study Questions and Correct Answers
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What are two benefits of making a compacted DCF model 1. Helps us learn the main features of a DCF model 2. Helps in a situation where we need a quick analysis 
What are two important dates in a DCF 1. Timing of the cashflows 2. Date of Valuation 
The time value of money is also called the _______ The time quantity of money 
What is the simplified formula to discount the cashflows Unlevered Free Cash Flow (UFCF)/ Weighted Average Cost of Capital (WACC) 
What are the three types of valuation tech...
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CFA Level 1 Formulas
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CFA Level 1 Formulas 
 
Price change based on convexity - ANSWER--duration(change in yield)+1/2(convexity)(change in yield)^2 
 
Effective Duration - ANSWER-Required if a bond has embedded options: [(v-)-(v+)]/[2V0(change in curve)] 
 
Modified Duration - ANSWER-[(v-)-(v+)]/[2V0(change in yield)] 
 
Future Value - ANSWER-PV(1+(I/Y)^N) 
 
PV - ANSWER-FV/(1+r)^n 
 
PV of perpetuity - ANSWER-PMT / discount rate 
 
Approximate percentage price change of a bond - ANSWER-(-)(modified duration)(ΔYTM) ...
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CFA Level 1: Quant| 221 QUESTIONS| WITH COMPLETE SOLUTIONS
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nominal risk free rate equals... correct answer: real risk free rate + expected inflation 
 
required interest rate on a security correct answer: nominal risk free rate + default risk premium + liquidity premium + maturity risk premium 
 
EAR or APY correct answer: (1+periodic rate)^m - 1 
 
always higher than annual percentage rates (not compounded) 
 
ordinary annuity correct answer: cash flows that occur at the end of each compounding period 
 
annuity due correct answer: payments or rec...
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