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Time Value of Money: Formula

The document outlines 10 formulas for calculating the present and future value of cash flows using time value of money principles. The formulas allow for calculating single amounts, mixed cash flow streams, ordinary annuities, and annuities due. The final formula calculates the effective interest rate.

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Parvez Rahman
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694 views2 pages

Time Value of Money: Formula

The document outlines 10 formulas for calculating the present and future value of cash flows using time value of money principles. The formulas allow for calculating single amounts, mixed cash flow streams, ordinary annuities, and annuities due. The final formula calculates the effective interest rate.

Uploaded by

Parvez Rahman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Time Value of Money: Formula

Present Value

FV
PV =
1. i n∗m ---PV with Single Amount
(1+ )
m
CF 0 CF 1 CF n
2. PV = 0
+ 1
+… … … … … …+ n−1 ---PV Mixed Stream (Beginning)
(1+i) (1+i) (1+i)
CF 1 CF 2 CF n
3. PV = 1
+ 2
+ … … … … … …+ n ---PV Mixed Stream (Ending)
(1+i) (1+i) (1+i)
1
1−
i n∗m
(1+ )
4. m ---Present Value of Ordinary Annuity
PV OA=CF∗⌊ ⌋
i
m
1
1−
i n∗m
(1+ )
5. m i m ---Present Value of Annuity Due
PV AD=CF∗⌊ ⌋∗(1+ )
i m
m

Future Value

i n∗m
6. FV =PV∗(1+ ) ---FV with Single Amount
m
7. FV =CF 0∗(1+i)n−0+ CF 1∗(1+i)n−1 +… … … … …+CF n∗(1+ i)n−(n−1) --FV Mixed Stream
(Beginning)
8. FV =CF 1∗(1+i)n−1 +CF 2∗(1+i)n−2+ … … … … …+CF n∗(1+i)n−n --FV Mixed Stream
(Ending)
i n∗m
(1+ ) −1
m
9. FV OA=CF∗⌊ ⌋ ---Future Value of Ordinary Annuity
i
m

i n∗m
(1+ ) −1
m i m
10. FV AD=CF∗⌊ ⌋∗(1+ ) ---Future Value of Annuity Due
i m
m
Effective Interest Rate

i n∗m
11. EIR=(1+ ) −1+ f
m

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