Professional Documents
Culture Documents
TVM Formulas I N
TVM Formulas I N
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 (
= FVA
i
i
PMT
n
( )
(
+
=
m i
m i
PMT
nm
/
1 ) / ( 1
FVA
4
Present Value of an
Annuity. ( PVIFAi,n )
(
i
i
PMT
n
) + 1 ( - 1
= PVA
-
( )
(
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 -
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
(
|
.
|
\
|
(
|
.
|
\
|
|
.
|
\
|
m
i
m
i
m
PMT m
i
n
+ 1 ln *
+
FVA
ln
=
10
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
+
(
= ,
for PVA(i) < PMT
(
|
.
|
\
|
+
(
=
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