Formula Sheet: The Time Value of

Money
Prepared By: Cabrera, Allan Arthur L.
19 June 2014
FIN 199: Special Topics in Finance
(Quantitative Methods and Portfolio Management)
First Semester
School Year 2014-2015
1 Notation
Symbol Term
FV
N
Future value of the cash ow N periods from today
PV Present value of the cash ow
r Rate of interest per period
N Number of periods
r
s
Stated annual interest rate
m Number of compounding periods per year
EAR Eective Annual Rate
A Annuity Amount
2 Formulas
General form for the future value of a single cash ow over N periods
FV
N
= PV (1 +r)
N
(1)
Future value of a single cash ow compounded m times per year over N
years
FV
N
= PV

1 +
r
s
m

mN
(2)
Future value of a single cash ow continuously compounded over N years
FV
N
= PV e
rsN
(3)
1
Eective Annual Rate given a stated annual interest rate compounded m
times per year
EAR =

1 +
r
s
m

m
1 (4)
Eective Annual Rate given a continuously compounded interest rate
EAR = e
rs
1 (5)
Future value of an ordinary annuity
FV
N
= A

(1 +r)
N
1
r

(6)
Future value of an annuity due
FV
N
= A

(1 +r)
N
1
r

(1 +r) (7)
General form for the present value of a single cash ow over N periods
PV = FV
N
(1 +r)
N
(8)
Present value of a single cash ow discounted m times per year over N years
PV = FV
N

1 +
r
s
m

mN
(9)
Present value of an ordinary annuity
PV = A

1
1
(1 +r)
N
r

(10)
Present value of an annuity due
PV = A

1
1
(1 +r)
N
r

(1 +r) (11)
Present value of a perpetuity
PV =
A
r
(12)
Periodic growth/interest rate over N periods
g =

FV
N
PV

1/N
1 (13)
Number of periods N
2
N =
ln (FV
N
/PV )
ln(1 +r)
(14)
Size of annuity payments
A =
PV

1 (1 +r)
N
r
(15)
Reference
Institute, CFA. CFA Institute Level I 2014 Volume 1 Ethical and Professional
Standards and Quantitative Methods. John Wiley & Sons P&T.
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