FIn 300 Chapter 5 Equations

Mark Laplante

FV

Future value of a lump sum, later on the timeline than the present value

PV

Present value of a lump sum, earlier on the timeline than the future value

r

Periodic rate expressed in decimal form, a growth rate in dollars

t

Number of periods, must be consistent with the interval of time over which a contract defines the periodic rate

m

The number of compounding periods per year

P

Price

CF

Cash flow, cash income

Interest Rates - Find APR from Periodic Rate

The annual simple interest the law requires consumer loans to disclose

Interest Rates - Find APY from APR or Periodic Rate

The annual interest rate reflects all interest paid or received during the year. It’s the same as the EAR.

Returns - Find Dollar Return

Change in asset price plus dividends received

Returns - Find Total Return

Percent change in asset price plus dividends as a percent of beginning asset price

Returns - Find Geometric Return

Divide future value by present value, raise the result to the power of one divided by the number of periods, then subtract one

Continuous Compounding - Find APY

Converts a continuously compounded APR into the actual annual yield

Continuous Compounding - Find FV

Calculates how much an investment grows to over time

Continuous Compounding — Find PV

Calculates what a future payment is worth today

Continuous Compounding — Find APR

Finds the continuously compounded annual rate from PV, FV, and time

Continuous Compounding — Find Time

Finds how long an investment takes to grow from PV to FV