x

ln(x)
-0.5
-0.4
-0.3
-0.2
-0.1
0
0.01
0.05
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2

-4.6052
-2.9957
-2.3026
-1.6094
-1.204
-0.9163
-0.6931
-0.5108
-0.3567
-0.2231
-0.1054
0
0.09531
0.18232
0.26236
0.33647
0.40547
0.47
0.53063
0.58779
0.64185
0.69315

exp(x)
ln(exp(x))
0.60653
-0.5
0.67032
-0.4
0.74082
-0.3
0.81873
-0.2
0.90484
-0.1
1
0
1.01005
0.01
1.05127
0.05
1.10517
0.1
1.2214
0.2
1.34986
0.3
1.49182
0.4
1.64872
0.5
1.82212
0.6
2.01375
0.7
2.22554
0.8
2.4596
0.9
2.71828
1
3.00417
1.1
3.32012
1.2
3.6693
1.3
4.0552
1.4
4.48169
1.5
4.95303
1.6
5.47395
1.7
6.04965
1.8
6.68589
1.9
7.38906
2

Logarithms and Exponential Functions

-1

Note: graph is created using

chart wizard. Chart type is xy
scatter.

y = ln(x), y=exp(x)
6
4
2
ln(x)

0
-1

-0.5

0.5

-2
-4
-6
x

Note: graph is created using

chart wizard. Chart type is xy

1.5

2.5

exp(x)

Time Value of Money

V
$1,000.00

Compounding
Frequency

R
0.2

annual
quarterly
weekly
daily
continuously

m
1
4
52
365
infinity

Periodic Rate
20.00%
5.00%
0.38%
0.05%
0.00%

FVnc $V e Rn

Value of V Effective
at end of Annual
year
Rate
$1,200.00
$1,215.51
$1,220.93
$1,221.34
$1,221.40

FVnc $V e Rn

RA 1 1
m

20.00%
21.55%
22.09%
22.13%
22.14%

FVnm $V 1
m

eR 1

mn

Ex 1
P(t-1)
msft

P(t)
85

R(t)

1+R(t)

90

Ex 2
P(t-2)
msft

P(t-1)
80

P(t)
85

R(t-1)

90
R(t)
R2(t)

Ex 3
P(t-1)
msft
sbux

P(t)

R(t)
x(t)
90 0.058824
28 -0.06667

P(t)

R(t)
r(t)
x(t)
90 0.058824 0.057158
28 -0.06667 -0.06899

85
30

Rp(t)
0.25 0.014706
0.75
-0.05
-0.03529

Ex 3
P(t-1)
msft
sbux

85
30

0.25
0.75

rp(t)
rp(t)
-0.03593 0.01429
-0.05174
-0.03746

7/1/2002
7/1/2003
7/1/2004

7/1/2003
7/1/2004

7/1/2000

7/1/1999

7/1/1998

7/1/1997

7/1/1996

7/1/1995

7/1/1994

7/1/1993

7/1/1992

7/1/2002

5
4
3
2
1
0
7/1/2001

Log Price of SBUX

7/1/2001

7/1/2000

7/1/1999

7/1/1998

7/1/1997

7/1/1996

7/1/1995

7/1/1994

7/1/1993

7/1/1992

50
40
30
20
10
0

simple return

Month

cc return

8/3/2004

2/3/2004

8/3/2003

2/3/2003

8/3/2002

2/3/2002

8/3/2001

2/3/2001

8/3/2000

2/3/2000

8/3/1999

2/3/1999

8/3/1998

2/3/1998

8/3/1997

2/3/1997

8/3/1996

2/3/1996

8/3/1995

2/3/1995

8/3/1994

2/3/1994

8/3/1993

2/3/1993

8/3/1992

R(t)

Monthly simple return on SBUX

0.4

0.3

0.2

0.1

-0.1

-0.2

-0.3

-0.4

-0.5

-0.6

Date
Adj. Close* log price
Jul-92
1.66 0.506818
Aug-92
1.55 0.438255
Sep-92
1.89 0.636577
Oct-92
1.84 0.609766
Nov-92
2.36 0.858662
Dec-92
2.31 0.837248
Jan-93
2.41 0.879627
Feb-93
2.27 0.81978
Mar-93
2.38
0.8671
Apr-93
2.42 0.883768
May-93
3 1.098612
Jun-93
3.06 1.118415
Jul-93
2.97 1.088562
Aug-93
3.03 1.108563
Sep-93
3.42 1.229641
Oct-93
3.34 1.205971
Nov-93
2.78 1.022451
Dec-93
2.78 1.022451
Jan-94
3 1.098612
Feb-94
2.91 1.068153
Mar-94
3.05 1.115142
Apr-94
3.72 1.313724
May-94
3.56 1.269761
Jun-94
3.16 1.150572
Jul-94
3.62 1.286474
Aug-94
3.53 1.261298
Sep-94
2.88 1.05779
Oct-94
3.39 1.22083
Nov-94
3.35 1.20896
Dec-94
3.44 1.235471
Jan-95
3 1.098612
Feb-95
2.98 1.091923
Mar-95
3 1.098612
Apr-95
2.94 1.07841
May-95
3.63 1.289233
Jun-95
4.45 1.492904
Jul-95
4.67 1.541159
Aug-95
5 1.609438
Sep-95
4.74 1.556037
Oct-95
4.91 1.591274
Nov-95
5.28 1.663926
Dec-95
5.25 1.658228
Jan-96
4.19 1.432701
Feb-96
4.41 1.483875
Mar-96
5.83 1.763017
Apr-96
6.78 1.913977
May-96
6.78 1.913977
Jun-96
7.06 1.954445
Jul-96
6.5 1.871802
Aug-96
8.19 2.102914
Sep-96
8.25 2.110213

R(t)
-0.06627
0.219355
-0.02646
0.282609
-0.02119
0.04329
-0.05809
0.048458
0.016807
0.239669
0.02
-0.02941
0.020202
0.128713
-0.02339
-0.16766
0
0.079137
-0.03
0.04811
0.219672
-0.04301
-0.11236
0.14557
-0.02486
-0.18414
0.177083
-0.0118
0.026866
-0.12791
-0.00667
0.006711
-0.02
0.234694
0.225895
0.049438
0.070664
-0.052
0.035865
0.075356
-0.00568
-0.2019
0.052506
0.321995
0.16295
0
0.041298
-0.07932
0.26
0.007326

r(t)
-0.06856
0.198322
-0.02681
0.248896
-0.02141
0.042379
-0.05985
0.047321
0.016667
0.214845
0.019803
-0.02985
0.020001
0.121078
-0.02367
-0.18352
0
0.076161
-0.03046
0.046989
0.198582
-0.04396
-0.11919
0.135902
-0.02518
-0.20351
0.16304
-0.01187
0.026511
-0.13686
-0.00669
0.006689
-0.0202
0.210823
0.203671
0.048255
0.068279
-0.0534
0.035237
0.072652
-0.0057
-0.22553
0.051174
0.279142
0.15096
0
0.040468
-0.08264
0.231112
0.007299

Rt(2)

0.138554
0.187097
0.248677
0.255435
0.021186
-0.01732
-0.01245
0.066079
0.260504
0.264463
-0.01
-0.0098
0.151515
0.10231
-0.18713
-0.16766
0.079137
0.046763
0.016667
0.278351
0.167213
-0.15054
0.016854
0.117089
-0.20442
-0.03966
0.163194
0.014749
-0.10448
-0.13372
0
-0.01342
0.21
0.513605
0.286501
0.123596
0.014989
-0.018
0.113924
0.069246
-0.20644
-0.16
0.391408
0.537415
0.16295
0.041298
-0.0413
0.160057
0.269231

r2(t)=ln(P(t)/P(t-2))

0.129759
0.171511
0.222085
0.227482
0.020965
-0.01747
-0.01253
0.063988
0.231512
0.234647
-0.01005
-0.00985
0.141079
0.097408
-0.20719
-0.18352
0.076161
0.045702
0.016529
0.245571
0.154619
-0.16315
0.016713
0.110726
-0.22868
-0.04047
0.15117
0.014642
-0.11035
-0.14355
0
-0.01351
0.19062
0.414495
0.251926
0.116534
0.014878
-0.01816
0.107889
0.066954
-0.23123
-0.17435
0.330316
0.430102
0.15096
0.040468
-0.04217
0.148469
0.238411

Oct-96
Nov-96
Dec-96
Jan-97
Feb-97
Mar-97
Apr-97
May-97
Jun-97
Jul-97
Aug-97
Sep-97
Oct-97
Nov-97
Dec-97
Jan-98
Feb-98
Mar-98
Apr-98
May-98
Jun-98
Jul-98
Aug-98
Sep-98
Oct-98
Nov-98
Dec-98
Jan-99
Feb-99
Mar-99
Apr-99
May-99
Jun-99
Jul-99
Aug-99
Sep-99
Oct-99
Nov-99
Dec-99
Jan-00
Feb-00
Mar-00
Apr-00
May-00
Jun-00
Jul-00
Aug-00
Sep-00
Oct-00
Nov-00
Dec-00
Jan-01

8.12
8.66
7.16
8.56
8.41
7.41
7.47
7.88
9.73
10.23
10.25
10.45
8.25
8.72
9.6
9.14
9.89
11.33
12.03
12
13.36
10.47
7.89
9.05
10.85
11.53
14.03
13.02
13.22
14.03
18.47
18.44
18.78
11.62
11.44
12.39
13.6
13.28
12.12
16
17.57
22.41
15.11
17
19.09
18.75
18.32
20.03
22.34
22.78
22.12
24.97

2.09433
2.158715
1.96851
2.1471
2.129421
2.00283
2.010895
2.064328
2.275214
2.325325
2.327278
2.346602
2.110213
2.165619
2.261763
2.21266
2.291524
2.427454
2.487404
2.484907
2.592265
2.348514
2.065596
2.202765
2.384165
2.444952
2.641198
2.566487
2.581731
2.641198
2.916148
2.914522
2.932792
2.452728
2.437116
2.51689
2.61007
2.586259
2.494857
2.772589
2.866193
3.109507
2.715357
2.833213
2.949165
2.931194
2.907993
2.997231
3.106379
3.125883
3.096482
3.217675

-0.01576
0.066502
-0.17321
0.195531
-0.01752
-0.11891
0.008097
0.054886
0.234772
0.051387
0.001955
0.019512
-0.21053
0.05697
0.100917
-0.04792
0.082057
0.145602
0.061783
-0.00249
0.113333
-0.21632
-0.24642
0.147022
0.198895
0.062673
0.216826
-0.07199
0.015361
0.061271
0.316465
-0.00162
0.018438
-0.38126
-0.01549
0.083042
0.097659
-0.02353
-0.08735
0.320132
0.098125
0.27547
-0.32575
0.125083
0.122941
-0.01781
-0.02293
0.093341
0.115327
0.019696
-0.02897
0.128843

-0.01588
0.064385
-0.1902
0.17859
-0.01768
-0.12659
0.008065
0.053433
0.210886
0.050111
0.001953
0.019324
-0.23639
0.055406
0.096144
-0.0491
0.078864
0.13593
0.059949
-0.0025
0.107359
-0.24375
-0.28292
0.137169
0.1814
0.060787
0.196246
-0.07471
0.015244
0.059467
0.27495
-0.00163
0.01827
-0.48006
-0.01561
0.079774
0.09318
-0.02381
-0.0914
0.277732
0.093604
0.243314
-0.39415
0.117857
0.115951
-0.01797
-0.0232
0.089238
0.109148
0.019504
-0.0294
0.121193

-0.00855
0.049697
-0.11823
-0.01155
0.174581
-0.13435
-0.11177
0.063428
0.302544
0.298223
0.053443
0.021505
-0.19512
-0.16555
0.163636
0.048165
0.030208
0.239606
0.21638
0.059135
0.110557
-0.1275
-0.40943
-0.13563
0.375158
0.274033
0.293088
0.129228
-0.05773
0.077573
0.397126
0.314326
0.016784
-0.36985
-0.39084
0.066265
0.188811
0.071832
-0.10882
0.204819
0.44967
0.400625
-0.14001
-0.24141
0.263402
0.102941
-0.04034
0.068267
0.219432
0.137294
-0.00985
0.096137

-0.00858
0.048502
-0.12582
-0.01161
0.160911
-0.14427
-0.11853
0.061497
0.264319
0.260997
0.052064
0.021277
-0.21706
-0.18098
0.15155
0.047041
0.029761
0.214794
0.195879
0.057453
0.104862
-0.13639
-0.52667
-0.14575
0.318569
0.242188
0.257033
0.121534
-0.05947
0.074711
0.334417
0.273324
0.016645
-0.46179
-0.49568
0.064162
0.172954
0.069369
-0.11521
0.18633
0.371336
0.336919
-0.15084
-0.27629
0.233808
0.09798
-0.04117
0.066037
0.198385
0.128652
-0.0099
0.091792

Feb-01
Mar-01
Apr-01
May-01
Jun-01
Jul-01
Aug-01
Sep-01
Oct-01
Nov-01
Dec-01
Jan-02
Feb-02
Mar-02
Apr-02
May-02
Jun-02
Jul-02
Aug-02
Sep-02
Oct-02
Nov-02
Dec-02
Jan-03
Feb-03
Mar-03
Apr-03
May-03
Jun-03
Jul-03
Aug-03
Sep-03
Oct-03
Nov-03
Dec-03
Jan-04
Feb-04
Mar-04
Apr-04
May-04
Jun-04
Jul-04
Aug-04
Sep-04

23.82
21.22
19.35
19.52
23
18.04
16.87
14.94
17.12
17.72
19.05
23.77
23.01
23.13
22.82
24.28
24.85
19.63
20.1
20.66
23.84
21.74
20.38
22.72
23.45
25.76
23.51
24.67
24.55
27.33
28.39
28.8
31.6
32.17
33.16
36.61
37.4
37.87
38.92
40.6
43.49
46.99
43.24
45.46

3.170526
3.054944
2.962692
2.97144
3.135494
2.892592
2.825537
2.704042
2.840247
2.874694
2.947067
3.168424
3.135929
3.14113
3.127637
3.189653
3.212858
2.977059
3.00072
3.028199
3.171365
3.079154
3.014554
3.123246
3.15487
3.248823
3.157426
3.205588
3.200712
3.307985
3.346037
3.360375
3.453157
3.471034
3.501344
3.600321
3.621671
3.634159
3.661508
3.703768
3.772531
3.849935
3.766766
3.816833

-0.04606
-0.10915
-0.08812
0.008786
0.178279
-0.21565
-0.06486
-0.1144
0.145917
0.035047
0.075056
0.247769
-0.03197
0.005215
-0.0134
0.063979
0.023476
-0.21006
0.023943
0.027861
0.153921
-0.08809
-0.06256
0.114818
0.03213
0.098507
-0.08734
0.049341
-0.00486
0.113238
0.038785
0.014442
0.097222
0.018038
0.030774
0.104041
0.021579
0.012567
0.027726
0.043165
0.071182
0.080478
-0.0798
0.051341

-0.04715
-0.11558
-0.09225
0.008747
0.164055
-0.2429
-0.06705
-0.12149
0.136205
0.034447
0.072373
0.221357
-0.0325
0.005202
-0.01349
0.062016
0.023205
-0.2358
0.023661
0.02748
0.143165
-0.09221
-0.0646
0.108692
0.031625
0.093952
-0.0914
0.048162
-0.00488
0.107273
0.038052
0.014338
0.092782
0.017877
0.03031
0.098977
0.021349
0.012489
0.027349
0.04226
0.068763
0.077404
-0.08317
0.050067

0.076854
-0.15018
-0.18766
-0.08011
0.18863
-0.07582
-0.26652
-0.17184
0.014819
0.186078
0.112734
0.341422
0.207874
-0.02692
-0.00826
0.049719
0.088957
-0.19152
-0.19115
0.052471
0.18607
0.052275
-0.14513
0.045078
0.150638
0.133803
0.002559
-0.04231
0.044236
0.107823
0.156415
0.053787
0.113068
0.117014
0.049367
0.138017
0.127865
0.034417
0.040642
0.072089
0.11742
0.157389
-0.00575
-0.03256

0.074043
-0.16273
-0.20783
-0.0835
0.172802
-0.07885
-0.30996
-0.18855
0.01471
0.170652
0.10682
0.29373
0.188862
-0.02729
-0.00829
0.048522
0.08522
-0.21259
-0.21214
0.05114
0.170645
0.050954
-0.15681
0.044092
0.140316
0.125577
0.002555
-0.04323
0.043286
0.102397
0.145325
0.05239
0.10712
0.110659
0.048187
0.129287
0.120326
0.033838
0.039838
0.069609
0.111023
0.146167
-0.00577
-0.0331

Asset Return Calculations

I. Simple Returns

month
t
1
2
3
Rt

One
Period
Return
Rt

Price
Pt
80
85
90

0.0625
0.0588

Pt Pt 1
Pt 1

Rt (2)

Two
Period
Return
R t (2)

Two
Period
Return
R t (2)

0.1250

Pt Pt 2
Pt 2

0.1250

Rt (2) (1 Rt 1 )(1 Rt ) 1

II. Continuously Compounded Returns

month
t
1
2
3

Price
Pt
80
85
90

ln(Price)
ln(P t )
4.382
4.4427
4.4998

One
Period
Return
rt

One
Period
Return
rt

0.0606
0.0572

0.0606
0.0572

rt ln( Pt ) ln( Pt 1 )

rt ln(1 Rt )

Two Period
Return
r t (2)

0.1178
rt (2) ln(1 Rt (2))
rt (2) ln( Pt ) ln( Pt 2 )

Note: this formula is not

very practical for
computations.

)(1 Rt ) 1

Two Period
Return
r t (2)

Two Period
Return
r t (2)

0.1178
rt (2) ln(1 Rt (2))

2) ln( Pt ) ln( Pt 2 )

0.1178
rt (2) rt 1 rt