APPROVED FORMULAS

Time Value:

FV = PV (FVFk,n)

FVOA = PMT (FVFOAk,n)

PV = FV (PVFk,n)

PVOA = PMT (PVFOAk,n)

Bond Valuation:

V = (INT x PVFOA) + (M x PVF) Gallagher text, pg. 320, formula 12-3

OR

B = I(PVIFA r,n) + M(PVIFr,n)

Rate of Return one year:

r = Pt Pt-1 + C

Pt-1

CAPM:

K = Krf+ (Km- Krf)

Gallagher formula pg 156, formula 7-6 (moving beta, , before parenthesis)

OR

r = Rf +(rm Rf)

NOTE: Krf is the risk free rate 90 day T-Bills) and is the same as Rf

Portfolio Beta

p = (w1 x 1) + (w2 x 2) (wj x j)

Gordon Model for Stock Valuation:

P = D1/(rs g)

9. You need to have $68,660 to buy a small vacation cabin. You have $10,000 to invest today and your investment will pay

12% interest. How long (n) will you have to leave that $10K in that investment? Show all work