Formula TVM and Bond valuation
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The document contains formulas for time value of money calculations including compounding value of lump sums and annuities, present value of single amounts and annuities, and effective interest rates. It also includes formulas for valuing bonds, securities, perpetual preference shares, redeemable preference shares, and equity shares using models like constant growth model, two stage growth model, and H-model. The document lists these formulas to help understand time value of money concepts and valuation of different financial instruments.
Formula TVM and Bond valuation
- 1. TYBBA AFM “TIME VALUE OF MONEY” FORMULAS 1. COMPOUNDING VALUE OF A LUMPSUM AMOUNT ‘OR’ F = P(FVIF) 2. COMPOUNDING VALUE OF AN ANNUITY IF INVESTMENT MADE AT END OF THE YEAR ‘OR’ F = A(FVIFA) 3. COMPOUNDING VALUE OF AN ANNUITY IF INVESTMENT MADE AT BEGENNING OF THE YEAR ‘OR’ F = A(FVIFA)(1+i) 4. PRESENT VALUE OF A SINGLE AMOUNT ‘OR’ ‘OR’ P = F(PVIF) H.D.PAWAR 9824315606
- 2. TYBBA AFM 5. PRESENT VALUE OF AN ANNUITY IF AMOUNT TO BE RECEIVED AT THE END OF YEAR OR P = A(PVIFA) 6. PRESENT VALUE OF AN ANNUITY IF AMOUNT TO BE RECEIVED IN THE BIGINNING OF THE YEAR OR P = A(PVIFA) (1+i) 7. PRESENT VALUE OF PERPECTUITY 8. EFFECTIVE INTEREST RATE 9. MULTIPERIOD COMPOUNDING H.D.PAWAR 9824315606
- 3. TYBBA AFM FORMULAS VALUATION OF BOND AND SECURITIES 1. VALUATION OF PERPECTUAL/IRREDEEMABLE BOND(DEBENTURE): 2. VALUATION OF REDEEMABLE BOND (DEBENTURE): ‘OR’ V = I (PVIFA) + MV (PVIF) 3. APPROXIMATE YIELD TO MATURITY(YTM): ‘OR’ TRIAL AND ERROR METHOD 4. BOND VALUE AMORTISATION: 5. VALUATION OF PERPCTUAL PREFERENCE SHARE: 6. VALUATION OF REDEEMABLE PREFERENCE SHARE: H.D.PAWAR 9824315606
- 4. TYBBA AFM 7. VALUATION OF EQUITY SHARE: CONSTENT GROWTH MODEL TWO STAGE GROWTH MODEL 8. H- MODEL Were: P0 = Intrinsic value of the share D0 =Current dividend per share r = Rate of return expected by investors gn = Normal long run growth rate ga = Current growth rate H = One half of the period during which ga will level off to gn H.D.PAWAR 9824315606