Formula Sheet

Present value of a single cash flow:

𝐶%
𝑃𝑉 =
(1 + 𝑖)%

Where Ct is cash flow at time t, i is the interest rate and t is the period.

Future value of a single cash flow:

𝐹𝑉 = 𝐶% (1 + 𝑖)%

Where Ct is cash flow at time t, i is the interest rate and t is the period.

Present value of a perpetuity:

𝐶,
𝑃𝑉 =
𝑖
Where C1 is cash flow in the first period, i is the interest rate.

Future value of annuity

(1 + 𝑖)% 1
𝐹𝑉 = 𝑐 . − 0
𝑖 𝑖

FV is future value of annuity at time t, c is the annuity, a constant cash flow per period, i is
interest rate.
Present value of a constant-growth perpetuity

𝐶,
𝑃𝑉 =
𝑟−𝑔
C1 is the cash flow at time 1, g is the growth rate, r is the rate of return.

Present value of two stage growth model:

𝐶3 (1 + 𝑔, ), 𝐶3 (1 + 𝑔, )4 𝐶3 (1 + 𝑔, )% 𝐶% (1 + 𝑔4 )
𝑃𝑉 = + + ⋯ + +
(1 + 𝑖), (1 + 𝑖) 4 (1 + 𝑖) % (1 + 𝑖 )% (𝑖 − 𝑔4 )

Where C0 is cash flow at time 0, t is the time period, g1 is the growth rate in the first stage, g2
is the growth rate in the second stage, i is the interest rate.
Yield to maturity of a bond

(Face value − PV)

Annual coupon + n
YTM =
PV + Face value
2

Where YTM is yield to maturity, PV is the present value of a bond, n is the maturity.

Real rate of return

(1+real rate) = (1+nominal rate) / (1+inflation rate)

Real rate is the real rate of return

Effective annual rate

EAR = (1+MR)12 −1

Where EAR is effective annual rate, MR is the monthly simple rate.

Equivalent annual cash flow

Equivalent annual cash flow = PV of all cash flows/ annuity factor.