AP/ADMS 3530 3.

00 Finance
Midterm Exam 1 Formula Sheet

Time Value of Money

Future Value
FV = Investment  1  r 
t
PV =
1  r t
C C1
PV of a perpetuity = PV of a growing perpetuity =
r rg

1 1 
PV of an annuity = C    t 
 r r(1  r )   (1  r ) t  1 
FV of an annuity = C   
 1  (1  r )  t   r 
= C   (easier to calculate)
 r 

1 1 
C1   1  g  
t Annuity factor =   t 
PV of a growing annuity =  1      r r(1  r ) 
r  g   1  r  
 1  (1  r )  t 
=  
FV of a growing annuity =
C1
r g

 (1  r ) t  (1  g) t   r 
(lower version is easier to calculate)
PV of an annuity due = (1 + r)  (PV of an annuity)
FV of an annuity due = (1 + r)  (FV of an annuity)
1  Nominal rate
1 + Real rate =
1  Inflation rate

APR = Period Rate  m 

EAR = 1  Period Rate   1
m
 where m = number of periods per year
1 
Period Rate = (1  EAR ) m  1 


1
 Bonds
1 1  Face Value
Price of a bond = PV (Coupons) + PV (Face Value) = C    t 

 r r(1  r )  (1  r ) t

Annual coupon payment

Current yield =
Bond price
Yield to maturity (YTM) = interest rate for which the present value of the bond’s
payments equals the price
Coupon income  Price change
Rate of return =
Investment