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Math for Financial Analysis Flashcards

Math for Financial Analysis Flashcards
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Present Value of an Annuity Formula

Present Value = P * ((1 - (1 + i )-n ) / i)

P: fixed payment amount; i: interest rate; n: number of payments

Got it
Future Value of an Annuity Formula

Future Value = PMT * ((( 1 + i )n - 1 ) / i )

PMT: monthly payment; i: interest rate; n: number of times interest is paid by bank

Got it
How much $1,200 will be worth in 25 years with 10.5% interest compounded monthly

Future Value = PV * (1 + i )n

PV = $1,200
i = 0.105/12
n = 25 years * 12 times a year = 300

$1,200 * (1 + 0.105/12)300 = $16,377.42

Got it
How much $25,000 will be worth in 10 years with 2.5% interest compounded QUARTERLY

Future Value = PV * (1 + i )n

PV = $25,000
i = 0.025 / 4
n = 10 years * 4 times a year = 40

$25,000 * (1 + 0.025 / 4)40 = $32,075.67

Got it
How much $50,000 will be worth in 4 years with 5% interest compounded annually

Future Value = PV * (1 + i )n

PV = $50,000
i = 0.05
n = 4 years

$50,000 * (1 + 0.05)4 = $60,775.31

Got it
How much a person needs to deposit if they need $45,000 in 5 years from a CD (Certificate of Deposit) with 2.5% interest compounded QUARTERLY

Present Value = FV / (1 + i )n

FV = $45,000
i = 0.025 / 4
n = 5 years * 4 times per year = 20

$45,000 / (1 + 0.025 / 4)20 = $39,727.81

Got it
How much a person needs to deposit if they need $100,000 in 7 years from a CD (Certificate of Deposit) with 10.5% interest compounded annually

Present Value = FV / (1 + i )n

FV = $100,000
i = 0.105
n = 7 years

$100,000 / (1 + 0.105)7 = $49,712.32

Got it
How much a person needs to deposit if they need $50,000 in 5 years from a CD (Certificate of Deposit) with 3% interest compounded annually

Present Value = FV / (1 + i )n

FV = $50,000
i = 0.03
n = 5 years

$50,000 / (1 + 0.03)5 = $43,130.44

Got it
Future Value of Money Formula

Future value = PV * (1 + i )n

PV: present value; i: interest rate; n: number of time periods

Got it
Present Value of Money Formula

Present value = FV / (1 + i )n

FV: future value; i: interest rate; n: number of time periods

Got it

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Flashcard Content Overview

Do you know the difference between a stock and a bond? Can you calculate the amount of money each is worth? If you are trying to save money for a large purchase in the future, do you know how much money to put in an account that pays interest?

All of these questions can be answered with the help of the following flashcard set. Use these flashcards to learn important terms and calculations for working with investments and annuities.

Front
Back
Present Value of Money Formula

Present value = FV / (1 + i )n

FV: future value; i: interest rate; n: number of time periods

Future Value of Money Formula

Future value = PV * (1 + i )n

PV: present value; i: interest rate; n: number of time periods

How much a person needs to deposit if they need $50,000 in 5 years from a CD (Certificate of Deposit) with 3% interest compounded annually

Present Value = FV / (1 + i )n

FV = $50,000
i = 0.03
n = 5 years

$50,000 / (1 + 0.03)5 = $43,130.44

How much a person needs to deposit if they need $100,000 in 7 years from a CD (Certificate of Deposit) with 10.5% interest compounded annually

Present Value = FV / (1 + i )n

FV = $100,000
i = 0.105
n = 7 years

$100,000 / (1 + 0.105)7 = $49,712.32

How much a person needs to deposit if they need $45,000 in 5 years from a CD (Certificate of Deposit) with 2.5% interest compounded QUARTERLY

Present Value = FV / (1 + i )n

FV = $45,000
i = 0.025 / 4
n = 5 years * 4 times per year = 20

$45,000 / (1 + 0.025 / 4)20 = $39,727.81

How much $50,000 will be worth in 4 years with 5% interest compounded annually

Future Value = PV * (1 + i )n

PV = $50,000
i = 0.05
n = 4 years

$50,000 * (1 + 0.05)4 = $60,775.31

How much $25,000 will be worth in 10 years with 2.5% interest compounded QUARTERLY

Future Value = PV * (1 + i )n

PV = $25,000
i = 0.025 / 4
n = 10 years * 4 times a year = 40

$25,000 * (1 + 0.025 / 4)40 = $32,075.67

How much $1,200 will be worth in 25 years with 10.5% interest compounded monthly

Future Value = PV * (1 + i )n

PV = $1,200
i = 0.105/12
n = 25 years * 12 times a year = 300

$1,200 * (1 + 0.105/12)300 = $16,377.42

Future Value of an Annuity Formula

Future Value = PMT * ((( 1 + i )n - 1 ) / i )

PMT: monthly payment; i: interest rate; n: number of times interest is paid by bank

Present Value of an Annuity Formula

Present Value = P * ((1 - (1 + i )-n ) / i)

P: fixed payment amount; i: interest rate; n: number of payments

Present value of an annuity with a fixed payment of $1,200 per month for 10 years with an annual interest rate of 3.5%
Present value of an annuity with a fixed payment of $800 per month for 5 years with an annual interest rate of 10%
Calculating Stock Earnings
Stock Earnings = Dividends paid + ((# shares sold * price per share) - selling transaction fee) - ((#shares purchased * price per share) - purchasing transaction fee)
Stock earnings for 350 stocks purchased for $50 per share plus a $5 transaction fee then sold for $60 per share plus a $10 transaction fee
Stock earnings for 80 stocks purchased for $25 per share plus a $5 transaction fee then sold for $20 per share plus a $5 transaction fee
Common (Regular) Stock

A partial ownership in a company that can be purchased by members of the public

Includes voting rights

Preferred Stock

A partial ownership in a company that can be purchased by members of the public

Does not include voting rights but does give priority access to dividend payouts

Dividends

Company earnings that are paid to stockholders, starting with those that own preferred stock

Paid as a dollar amount per stock owned

Par Value of a Bond
The actual face value of a purchased bond
Bond Yield Formula

Yield = (interest * par value)/price paid for bond

yield: actual interest earned; par value: the face value of the bond

The current yield for a person who receives a savings bond with a par value of $1000 and 5% annual interest, which was purchased for $900.
Yield = (0.05*$1000)/$900 = 0.056 = 5.6%

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