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TVM Formulas (I, N)

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basco23

This document provides formulas for calculating the time value of money under various scenarios including: 1) The future and present value of a lump sum that is compounded annually or continuously. 2) The future and present value of an annuity that is compounded annually or continuously. 3) The present value of a perpetuity compounded annually or continuously. 4) Conversions between the annual percentage rate, effective annual rate, and number of compounding periods per year. 5) Calculations for determining the number of periods required for an amount to grow or be depleted based on inputs like interest rate, payment amount, future value, and present value.

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TVM Formulas (I, N)

Uploaded by

basco23
146 views2 pages
This document provides formulas for calculating the time value of money under various scenarios including: 1) The future and present value of a lump sum that is compounded annually or continuously. 2) The future and present value of an annuity that is compounded annually or continuously. 3) The present value of a perpetuity compounded annually or continuously. 4) Conversions between the annual percentage rate, effective annual rate, and number of compounding periods per year. 5) Calculations for determining the number of periods required for an amount to grow or be depleted based on inputs like interest rate, payment amount, future value, and present value.

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time value of money formulas

Original Title

TVM Formulas (i,n)

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This document provides formulas for calculating the time value of money under various scenarios including: 1) The future and present value of a lump sum that is compounded annually or continuously. 2) The future and present value of an annuity that is compounded annually or continuously. 3) The present value of a perpetuity compounded annually or continuously. 4) Conversions between the annual percentage rate, effective annual rate, and number of compounding periods per year. 5) Calculations for determining the number of periods required for an amount to grow or be depleted based on inputs like interest rate, payment amount, future value, and present value.

Copyright:

Attribution Non-Commercial (BY-NC)
Download as DOC, PDF, TXT or read online from Scribd
Download as doc, pdf, or txt
146 views2 pages

TVM Formulas (I, N)

Uploaded by

basco23
This document provides formulas for calculating the time value of money under various scenarios including: 1) The future and present value of a lump sum that is compounded annually or continuously. 2) The future and present value of an annuity that is compounded annually or continuously. 3) The present value of a perpetuity compounded annually or continuously. 4) Conversions between the annual percentage rate, effective annual rate, and number of compounding periods per year. 5) Calculations for determining the number of periods required for an amount to grow or be depleted based on inputs like interest rate, payment amount, future value, and present value.

Copyright:

Attribution Non-Commercial (BY-NC)
Download as DOC, PDF, TXT or read online from Scribd
Download as doc, pdf, or txt
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N

u
m
b
e
r
Time Value of
Money Formula
For:
Annual Compounding
Compounded (m) Times
per Year
Continuous
Compounding
1
Future Value of a
Lump Sum.
( FVIFi,n )
) + 1 ( V P = V F
n
i
,
_

m
i
nm
+ 1 PV = FV ) PV( = FV
in
e
2
Present Value of
a Lump Sum.
( PVIFi,n )
) + 1 ( FV = PV
-n
i
,
_

m
i
nm
+ 1 FV = PV
-
) FV( = PV
-in
e
3
Future Value of
an Annuity.
( FVIFAi,n )
1
]
1


1 - ) + 1 (
= FVA
i
i
PMT
n
( )
1
]
1

m i
m i
PMT
nm
/
1 ) / ( 1
FVA
4
Present Value of
an Annuity.
( PVIFAi,n )
1
]
1

i
i
PMT
n
) + 1 ( - 1
= PVA
-
( )
1
]
1

m i
m i
PMT
nm
/
) / ( + 1 - 1
= PVA
-
5
Present Value of
a Perpetuity.
i
PMT
perpetuity PV
] 1 ) 1 [(
PV
/ 1
perpetuity
+

m
i
PMT
6
Effective Annual
Rate given the
APR.
APR = EAR 1 - + 1 = EAR
,
_

m
i
m
1 - = EAR
e
i
7
The length of
time required for
a PV to grow to a
FV.
) + (1 ln
(FV/PV) ln
=
i
n
( )
m
i
m
n
+ 1 ln *
FV/PV) ( ln
= FV/PV) ( ln *
1
=
i
n
8
The APR required
for a PV to grow
to a FV.
1 -
PV
FV
=
/ 1

,
_

n
i
1
1
]
1

,
_

1 -
PV
FV
* =
) /( 1 nm
m i (FV/PV) ln *
1
=
n
i
9
The length of
time required for
a series of PMTs
to grow to a
future amount
(FVA).
) + (1 ln
1 +
) (FVA)(
ln
=
i
PMT
i
n
1
]
1

1
]
1

,
_

1
]
1

,
_

,
_

m
i
m
i
m
PMT m
i
n
+ 1 ln *
+
FVA
ln
=
1
0
The length of
time required for
a series of PMTs
to exhaust a
specific present
amount (PVA).
) 1 ( ln
) )( PVA (
1 ln
i
PMT
i
n
+
1
]
1


,
for PVA(i) < PMT
1
]
1

,
_

+
1
]
1


m
i
m
PMT
m i
n
1 ln *
) / )( PVA (
1 ln
,
for PVA(i/m) < PMT
Legend
i = the nominal or Annual Percentage Rate n = the number of periods
m = the number of compounding periods per
year
EAR = the Effective Annual Rate
ln = the natural logarithm, the logarithm to the
base e
e = the base of the natural logarithm 2.71828
PMT = the periodic payment or cash flow Perpetuity = an infinite annuity
Prepared by Jim Keys
Prepared by Jim Keys

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