N

u
Time Value of
m Continuous
Money Formula Annual Compounding Compounded (m) Times per Year
b Compounding
For:
e
r
nm
Future Value of a  i 
1 F V = P V ( 1 + i )n FV = PV 1 +  FV = PV(e )in
Lump Sum. ( FVIFi,n )  m
- nm
Present Value of a  i 
2 PV = FV ( 1 + i )-n PV = FV 1 +  PV = FV( e )-in
Lump Sum. ( PVIFi,n )  m
Future Value of an  ( 1 + i )n - 1   1  (i / m)  nm  1
3 FVA = PMT   FVA  PMT  
Annuity. ( FVIFAi,n )  i  i/m
 
Present Value of an 1 - ( 1 + i )- n  1 -  1 + (i / m)  - nm 
4 PVA = PMT   PVA = PMT  
Annuity. ( PVIFAi,n ) i i/m
   
Present Value of a PMT PMT
5 PVperpetuity  PVperpetuity 
Perpetuity. i [(1  i )1/ m  1]
m
Effective Annual Rate  i 
6 EAR = APR EAR =  1 +  - 1 EAR = e i - 1
given the APR.  m

The length of time ln ( FV/PV)

ln (FV/PV) n= 1
7 required for a PV to n= i
grow to a FV. ln (1 + i ) m * ln  1   n=
i
* ln ( FV/PV)
m

The APR required for  FV 

1/ n  FV  1 /( nm )
 1
8 i=  -1 i = m *   - 1 i = * ln (FV/PV)
a PV to grow to a FV.  PV   PV 
 
 n

 i  FVA m 
The length of time  (FVA)( i )  ln   + 
required for a series ln  + 1   m  PMT i 
9  PMT  n=
of PMT’s to grow to a n=   i 
future amount (FVA). ln (1 + i ) m * ln 1 + 
  m 
 ( PVA )(i / m) 
 ( PVA )(i )  ln 1  
ln 1  PMT
n 
The length of time
PMT  , ,
required for a series n    i 
10 of PMT’s to exhaust a ln (1  i ) m * ln1  
specific present   m 
amount (PVA).
for PVA(i) < PMT
for PVA(i/m) < PMT

Legend
i = the nominal or Annual Percentage Rate n = the number of periods
m = the number of compounding periods per year EAR = the Effective Annual Rate
ln = the natural logarithm, the logarithm to the base e e = the base of the natural logarithm ≈ 2.71828
PMT = the periodic payment or cash flow Perpetuity = an infinite annuity

Prepared by Jim Keys