TIME VALUE OF MONEY FORMULA SHEET

# TVM Formula For: Annual Compounding

Compounded (m) Times
per Year
Continuous
Compounding
1

Future Value of a
Lump Sum. (FVIF
r,n
)

) r + 1 PV( = FV
n
( ) r/m 1 PV = FV
nm
+ ) PV(e = FV
rn

2

Present Value of a
Lump Sum. (PVIF
r,n
)

) r + 1 FV( = PV
-n
) r/m + 1 FV( = PV
-nm
) FV(e = PV
-rn

3
Future Value of an
Annuity. (FVIFA
r,n
)
(

r
1 - ) r + 1 (
CF = FVA
n

(

r/m
1 - ) r/m + 1 (
CF = FVA
nm


4
Present Value of an
Annuity. (PVIFA
r,n
)
(

r
) r + 1 ( - 1
CF = PVA
-n

( )
(

r/m
r/m + 1 - 1
CF = PVA
-nm


5
Present Value of
Perpetuity. (PV
p
)
r
CF
PV perpetuity =
1] r) [(1
CF
PV
1/m
perpetuity
+
=

6

Effective Annual Rate
given the APR.

APR = EAR 1 - r/m) (1 = EAR
m
+ 1 -
e
= EAR
r

7

The length of time
required for a PV to
grow to a FV.

r) + (1 ln
(FV/PV) ln
= n
r/m) (1 ln * m
FV/PV) ( ln
= n
+

r
(FV/PV) ln
= n
8

The APR required for
a PV to grow to a FV.

1 -
PV
FV
= r
1/n
|
.
|

\
|

(
(

|
.
|

\
|
1 -
PV
FV
* m = r
1/(nm)

n
(FV/PV) ln
= r
9
Present Value of a
Growing Annuity.
( )
( )
(
(

|
.
|

\
|
+
+

+
=
n
0
r 1
g 1
1
g r
g 1 CF
PV

VALUATION

1 Common Stock Valuation 0 growth
r
D
P o =
2 Common Stock Valuation Constant growth

3
Bond Valuation PVB =
(

r
) r + 1 ( - 1
CF
-n
+ ) r + 1 FV(
-n


Legend
r =the nominal or Annual Percentage Rate n =the number of periods D
o =
Current Dividend
m =the number of compounding periods per year EAR =the Effective Annual Rate D
1 =
Next Years Dividend
ln =the natural logarithm, the logarithm to the base e e = the base of the natural logarithm 2.71828 P
o =
Price/Value of the stock
CF =the periodic payment or cash flow Perpetuity =an infinite annuity g =growth rate