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A. Future Value and Present Value of a Single Cash Stream or Several Unequal Cash Streams
where: FV – future value PV – present value n – periods r – rate B. Net Present Value of a Project
C. Annuities
Future Value of Ordinary Annuity
or
Future Value of Annuity Due
Solving for PMT, r, n of a Future Value of Annuity
Apply basic Algebra to solve for the missing item Present Value of an Ordinary Annuity
Present Value of an Annuity Due
Loan Amortization Annual Payments Note: Solve for the Annuity Payments first.
Loan Amortization Monthly Payments
D. Perpetuity
E. Future Values with Non-‐Annual Periods
F. Finding n (years/period) of a future value problem Using the FV equation,
FVn -‐-‐-‐-‐-‐-‐ = (1+r)n PV Substitute the variables, FV and PV, with the figures given in problem. Your solution in dividing FVn/PV is your basis in using the FV Table. For example, you have 6.1051, and the rate given is 10%. Since rate (r) is given in the problem, find the 6.1051 in the 10% column, and check the corresponding period to arrive at your answer. In this example, the answer is 5 years.
G. Finding r (rate) of a future value problem
FVn -‐-‐-‐-‐-‐-‐ = (1+r)n PV Substitute the variables, FV and PV, with the figures given in problem. Your solution in dividing FVn/PV is your basis in using the FV Table. For example, you have 6.1051, and the period given is 5 years. Since period (n) is given in the problem, find the 6.1051 in the 5 years column, and check the corresponding rate to arrive at your answer. In this example, the answer is 10% years. H. Making Interest Rates Comparable
I. Strategy Map You may write problem solving tips here.
