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Summary of TVM

The document summarizes key time value of money concepts. It defines future value as the amount a dollar will grow to in the future accounting for interest. Present value is the amount today equivalent to a future sum accounting for interest. An ordinary annuity's future or present value treats the first payment as occurring at the end of the period, while an annuity due treats the first payment as occurring at the beginning of the period. Formulas are provided to calculate future and present values of a single dollar amount, ordinary annuities, and annuities due.

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Richelle Joy Reyes Benito
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58 views1 page

Summary of TVM

The document summarizes key time value of money concepts. It defines future value as the amount a dollar will grow to in the future accounting for interest. Present value is the amount today equivalent to a future sum accounting for interest. An ordinary annuity's future or present value treats the first payment as occurring at the end of the period, while an annuity due treats the first payment as occurring at the beginning of the period. Formulas are provided to calculate future and present values of a single dollar amount, ordinary annuities, and annuities due.

Uploaded by

Richelle Joy Reyes Benito
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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SUMMARY OF TIME VALUE OF MONEY CONCEPTS

Concept Future value (FV) of $1 Summary The amount of money that a dollar will grow to at some point in the future. The amount of money today that is equivalent to a given amount to be received or paid in the future. The future value of a series of equal-sized cash flows with the first payment taking place at the end of the first compounding period. The present value of a series of equal-sized cash flows with the first payment taking place at the end of the first compounding period. The future value of a series of equal-sized cash flows with the first payment taking place at the beginning of the annuity period. The present value of a series of equal-sized cash flows with the first payment taking place at the beginning of the annuity period. Formula FV = $1(1 + i) Table 6A-1

Present value (PV) of $1

PV =

6A-2

Future value of an ordinary annuity (FVA) of $1

FVA =

6A-3

Present value of an ordinary annuity (PVA) of $1

PVA =

6A-4

Future value of an annuity due (FVAD) of $1

FVAD = [ x (1+i)

6A-5

Present value of an annuity due (PVAD) of $1

PVAD =

[] x (1+i)

6A-6

Graphic 6-5

T6-21

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