Home | What Is Net Present Value ? | Privacy Policy |
---|---|---|
The purpose of this calculator is to provide calculations and details for bond valuation problems.
Instructions: Fill in the spaces that correspond to the number of years, maturity, coupon rate, and yield-to-maturity,
ConclusionFurther business analysis samples of Interest Rates and Bond PricesFuture Value of AnnuityFV = C + C( 1 + r ) + C ( 1 + r )^{2} + ... + C( 1 + r )^{n - 1} = C [((1+r)^{n}-1)/r]where C is the cashflow and n is the number of cashflows. Net Present Value of AnnuityNPV = C / (1 + r) + C / (1 + r)^{2} + ... + C / (1 + r)^{n} = C { 1 - [1/(1+r)^{n}] / r }where C is the cashflow and n is the number of cashflows.
Continuous CompoundingFrom compounding m times per year to continuous compounding:r_{c} = m * ln( 1 + r_{m} / m ) From continuous compounding to compounding m times per year: r_{m} = m( e^{rc / m} - 1 ) Example
Next, consider an interest rate that is quoted 12% per annum with continuous compounding. The equivalent rate with annual compounding is r_{1} = 1 (e^{0.12/1} - 1 ) 0.1275 = 12.75%
Compounding FrequencyFrom compounding m times per year to annual compounding:r = (1 + r_{m} / m) ^{m} - 1 From annual compounding to compounding m times per annum: r^{m} = m * [ (1 + r)^{(1/m)} - 1 ] Example
r = ( 1 + 0.08 / 4 )^{4} - 1 = 0.0824 = 8.24% From m to n compoundings per annum: The formula below can be used to transform a rate r^{n} with n compoundings per year to a rate r^{m} with m compoundings per year r^{n} = n * [ ( 1 + r_{m} / m )^{m/n} - 1 ] ExampleConsider a rate with compounding frequency four times per year.If the rate is 7% then the equivalent rate with semiannual compounding: r^{2} = 2 * [ ( 1 + 0.07 / 4 )_{4/2} - 1 ] = 0.0706 The equivalent rate with semiannual compounding is 7.06% |
Copyright 2010-2012 Netpresentvaluecalculator.com