Compounded (m) Times

Formula For: Annual Compounding

per Year

Future Value of a n
1
Lump Sum. (FVIFk,n) FV= PV ( 1+ k )

Present Value of a -n
2
Lump Sum. (PVIFk,n) PV= FV ( 1+ k )

( 1+k )n - 1
3
Future Value of an
Annuity. (FVIFAk,n) FVA = PMT
k [ ]
1-( 1+ k )-n
4
Present Value of an
Annuity. (PVIFAk,n) PVA= PMT [ k ]
Present Value of PMT
5 PV perpetuity =
Perpetuity. (PVp) k

Effective Annual
m
6 Rate given the EAR = APR EAR =(1+k/m ) - 1
APR.

n
PMT 1+g
7
Present Value of a
Growing Annuity.
Present value of
PVGA=
( k−g )
1−
[ ( )]
1+k
8 PVGP=PMT/(k-g)
growing perpetuity
9 Yield to Maturity =(C+(M-P)/n)/(M+P)/2
Portfolio Variance
10 σ p2=w12 σ 12 +w 22 σ 22 +2 w1 w2 ρ12 σ 1 σ 2
(2 securities)

Legend

k = the nominal or Annual Percentage Rate n = the number of periods

m = the number of compounding periods per EAR = the Effective Annual Rate
year
PMT = the periodic payment or cash flow Perpetuity = an infinite annuity
C= Rs. Coupon payment on the par value of the M=Maturity value of bond (Face value if not
bond redeemed at premium or discount)
P=current market price of the bond
σ =Standard deviation , w=security weight ∈ portfolio , ρ=correlation coefficient