Compounded (m) Times

Formula For: Annual Compounding

per Year

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

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

Future Value of an  ( 1 + k )n - 1
3 FVA = PMT  
Annuity. (FVIFAk,n)
 k 
Present Value of an 1 - ( 1 + k ) 
-n

4 PVA = PMT  
Annuity. (PVIFAk,n)
 k 
Present Value of PMT
5 PVperpetuity =
Perpetuity. (PVp) k

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

PMT   1 + g  
n
Present Value of a
PVGA = 1−  
(k − g )   1 + k  
7
Growing Annuity.
Present value of
8 PVGP=PMT/(k-g)
growing perpetuity
9 Yield to Maturity =(C+(M-P)/n)/(M+P)/2
Portfolio Variance
10 𝜎𝑝 2 = 𝑤1 2 𝜎1 2 + 𝑤2 2 𝜎2 2 + 2𝑤1 𝑤2 𝜌12 𝜎1 𝜎2
(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 𝐢𝐧 𝐩𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨, 𝛒 = 𝐜𝐨𝐫𝐫𝐞𝐥𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐞𝐟𝐟𝐢𝐜𝐢𝐞𝐧𝐭