Time Value of Money

Real Rate of Return n = nominal return , I = inflation return r= real rate of return or inflation
adjusted return

(1 + ) = (1 + )(1 + )

Future Value of Single Sum

= (1 + )

FV = Future Value P= Present Value r = rate of return n= number of years

Future Value of Continuous Compounding

=

Effective Interest Rate

()
= [1 + ] 1
()

Future Value of Annuity

(1 + ) 1
= [ ]

A = Saving per annum at the end of the year for n years

Future Value of Annuity Due

(1 + ) 1
= [ ] (1 + )

A = Saving per annum at the start of the year for n years

Future Value of Growing Annuity ( )

(1 + ) (1 + )
= [ ]
( )

Present Value of Annuity

1 1
= [ ]
(1 + )
Present Value of Annuity Due

1 1
= [ ] (1 + )
(1 + )

Present Value of Perpetuity


=

Present Value of Growing Annuity ( )

1+
= [1 ( ) ]
( ) 1+

r>g
g = growth rate per annum

Present Value of Growing Annuity Due

1+
= [1 ( ) ] (1 + )
( ) 1+

Present Value of Growing Annuity for perpetuity

=

Rule of 72
72
Doubling Period (Years) =