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Financial Management Theory Note Chapter 4 - Future value and present value with formula, excel formula

 




Chapter 4

The formula of future value

The time value of money is a principle that tells the true value of money that is available in present time or future time. It was considered that the people would rather have those money today or in the future.


货币时间价值是告诉金钱的真正价值原则,如果在目前或未来的时间可用。 它考量着人们希望在现在或者未来拥有这些金钱

Future Value 未来价值 Formula

  • Formula Without compounding period

=PV(1+I) ^N


  • Formula with compounding period

=PV(1+(I/M)) ^(N*M)

Present value值 formula

= future value*(1/(1+I) ^number of years))


= FV*(1/(1+i) ^n)

How to compute interest from FV and PV


=((FV/PV) ^(1/n))-1

How to compute period of year from PV and FV

Use Excel spreadsheet

=NPER (rate, pmt, PV, FV, type)

Effective Annual rate

=((1+i/m)^m)-1





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