Simple Interest
Compound Interest
Amount of £1
Present Value of £1
Amount of £1 per annum
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?
Annual Sinking Fund
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?
£30,000 invested per annum over 6 years assuming an interest rate of 6.75%.
What method would you use?
I need £75,000 in 7.5 years time and I can achieve an interest rate of 4.5%.
What method should I use?
Rack-Rented Valuation
Term & Reversion
Hardcore Method
Short-cut DCF
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?
Rent with growth
YP for a term of years
YP into Perp
YP of a reversion into perpetuity
Uses for ASF