Accounting: Time Value of Money

Accounting: Time Value of Money

by Cindy Xinyu Li

1. present value of a lump sum

1.1. PV= future value * present value factor (i,n)

1.2. discounting

1.3. PV=FV / future value factor

2. future value of an annuity due

2.1. FV=payment * FV annual factor * (1+i)

3. pv of an annuity due

3.1. pv= payment * pv annuity factor * (1+i)

4. future value of a lump sum

4.1. FV=present value * future value factor (i,n)

4.2. adjustment to interest rate: i * #of compounds per year

4.3. adjustment to time period: n * #of compounds per year

5. future value of an ordinary annuity

5.1. FV=payment * FV annuity factor (i,n)

5.2. when the compounding frequency increases, the FV increase

6. present value of an ordinary annuity

6.1. PV= payment * PV annuity factor （i,n)