2599488
| Question | Answer |
| Simple Interest | P x (1 + i + n) p= initial sum invested i= interest rate per time period n= number of time periods |
| Compound Interest | P x (1 +i)^n |
| Amount of £1 | (1 + i)^n |
| Present Value of £1 | PV = 1 / (1 + i)^n OR PV = 1/A |
| Amount of £1 per annum | ((1 + i)^n - 1)/i OR A-1/i |
| Mr Y is 30 and he has taken out a life insurance policy. His annual premium is £650 per annum, payable at the end of each year and the policy will mature when he retires at 65. How much all he receive on maturity of the policy assuming an annual interest rate of 4.25%? What methods would be used? | Amount of £1 per annum x initial sum |
| Annual Sinking Fund | i/((1 + i)^n -1) OR i / A -1 |
| Calculate the amount that has to be invested at end of each year over 25 years assuming interest at 3.5% per annum in order to have £90,000 at the end of the term. What method would you use? | Annual Sinking Fund x sum of money invested each year |
| £30,000 invested per annum over 6 years assuming an interest rate of 6.75%. What method would you use? | Amound of £1 per annum x amount invested per annum |
| I need £75,000 in 7.5 years time and I can achieve an interest rate of 4.5%. What method should I use? | Annual Sinking Fund x amount needed |
| Rack-Rented Valuation | Rent passing pa x YP in perp @ ARY Capital Value = |
| Term & Reversion | Rent Passing pa x YP for 3 years @ = ERV pa x YP of a reversion into perp @ = |
| Hardcore Method | Rent passing pa x YP in perp @ = Uplift at review x YP of a reversion into perp @ = |
| Short-cut DCF | Rent passing pa x YP for a term of years = ERV pa x YP in perp @ x PV in ... years at @ = |
| A high street shop was let 2 years ago at £75,000 pa on a 15 year lease with 5 yearly rent reviews. The ERV is now £80,000. Market evidence indicated that a similar shop at an initial yield of 7.00% recently + investors require a TRR of 10% for similar investments. Using a 3.42% pa growth rate. Which method should you use? | Short-cut DCF |
| Rent with growth | (1 + g)^n |
| YP for a term of years | (1 - 1/(1 + i)^n)/ i OR (1- (1/A)) / i |
| YP into Perp | 1 / i |
| YP of a reversion into perpetuity | 1 / i x A OR 1/ i (1 + i)^n |
| Uses for ASF | To replace the value invested in a wasted asset To understand what the annual investment has to accumulate a given sum at the end of a set period |
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