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    Time Value of Money Formulas

    Uploaded by

    Rahat Islam
    The document outlines formulas for calculating the time value of money. It presents the basic formula for calculating future value (FV) given present value (PV), interest rate (r), and number of periods (n). It then derives additional formulas to calculate PV, r, and n using the basic formula. The document also provides formulas for calculating future value of annuity (FVA), future value of annuity due (FVA due), present value of annuity (PVA), and present value of annuity due (PVA due) using payment/installment (PMT), interest rate (r), and number of periods (n). It notes how to adjust r and n based on the frequency of payments/installments

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    © All Rights Reserved
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    Time Value of Money Formulas

    Uploaded by

    Rahat Islam
    41 views3 pages
    The document outlines formulas for calculating the time value of money. It presents the basic formula for calculating future value (FV) given present value (PV), interest rate (r), and number of periods (n). It then derives additional formulas to calculate PV, r, and n using the basic formula. The document also provides formulas for calculating future value of annuity (FVA), future value of annuity due (FVA due), present value of annuity (PVA), and present value of annuity due (PVA due) using payment/installment (PMT), interest rate (r), and number of periods (n). It notes how to adjust r and n based on the frequency of payments/installments

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    The document outlines formulas for calculating the time value of money. It presents the basic formula for calculating future value (FV) given present value (PV), interest rate (r), and number of periods (n). It then derives additional formulas to calculate PV, r, and n using the basic formula. The document also provides formulas for calculating future value of annuity (FVA), future value of annuity due (FVA due), present value of annuity (PVA), and present value of annuity due (PVA due) using payment/installment (PMT), interest rate (r), and number of periods (n). It notes how to adjust r and n based on the frequency of payments/installments

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    41 views3 pages

    Time Value of Money Formulas

    Uploaded by

    Rahat Islam
    The document outlines formulas for calculating the time value of money. It presents the basic formula for calculating future value (FV) given present value (PV), interest rate (r), and number of periods (n). It then derives additional formulas to calculate PV, r, and n using the basic formula. The document also provides formulas for calculating future value of annuity (FVA), future value of annuity due (FVA due), present value of annuity (PVA), and present value of annuity due (PVA due) using payment/installment (PMT), interest rate (r), and number of periods (n). It notes how to adjust r and n based on the frequency of payments/installments

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    © All Rights Reserved
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    Time Value of Money Formulas:

    The Basic Formula, FV = PV (1+r)n . . . (i)


    Here, FV refers to Future Value
    PV refers to Present Value
    r refers to Interest Rate
    n refers to Number of Periods

    We can derive multiple equations using the above formula


    FV
    For instance, PV = . . . (ii)
    (1+r)n

    FV
    Again, (1+r)n =
    PV

    n FV
     (1+r) =
    PV

    n FV
     r= –1 . . . (iii)
    PV

    FV
    Again, (1+r)n =
    PV
    FV
     n log (1+r) = log ( )
    PV
    FV
    log (PV )
     n= . . . (iv)
    log (1+r)

    [P.T.O.]
    Make sure to press shift before you press that button

    [P.T.O.]
    Annuity Formulas:
    (1+r)n − 1
    Future Value of Annuity, FVA = PMT [ ]
    r
    (1+r)n − 1
    Future Value of Annuity (Due), FVA (Due) = PMT [ ] (1+r)
    r
    1
    1− (1+r )n
    Present Value of Annuity, PVA = PMT [ ]
    r
    1
    1− (1+r )n
    Present Value of Annuity (Due), PVA (Due) = PMT [ ] (1+r)
    r

    Here, PMT refers to Payment/Installment


    r refers to Interest Rate
    n refers to Number of Periods

    When payment/installment is annual: r and n remains as it is


    When payment/installment is half-yearly: we divide r by 2 and multiply n by 2
    When payment/installment is quarterly: we divide r by 4 and multiply n by 4
    When payment/installment is monthly: we divide r by 12 and multiply n by 12
    When payment/installment is weekly: we divide r by 52 and multiply n by 52
    When payment/installment is daily: we divide r by 360 and multiply n by 360

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