1
Q
What is the formula for compounding/discounting?
A
(1+r)^n
2
Q
What is net present value?
A
The difference between present value of inflows and outflows. >0, accept project.
3
Q
What is reinvestment return?
A
The difference between simple and compound interest.
4
Q
What is an annuity?
A
A series of equal payments received at the end of a period for a fixed number of periods.
5
Q
What is the formula for PV annuity?
A
PV annuity = Cashflow x 1/r (1- (1/r)^n)
6
Q
What is a perpetuity?
A
Equal payments at regular intervals, infinite or indefinite.
7
Q
What is the formula for perpetuity?
A
£x/r
8
Q
What is the formula for APR?
A
APR = (1 + period rate)^n-1
9
Q
What is the internal rate of return (IRR)?
A
The discount rate where the NPV = 0.
