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2 - Time Value of Money

Table of Contents

TIME VALUE OF MONEY
Simple Interest
Compound Interest
Formula for Calculating Compound Interest
Fun Formulas
FV Tables
Annuities
FV of an Annuity Tables
Present Value
Present Value Tables
The Most Fun Formulas
PV of an Annuity Tables
Intrayear Compounding
Intrayear Compounding (Example)
Annuities Dues
Perpetuity
Perpetuity Example
Practice

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Present Value Tables

Present Value Tables
			PV Factors	PV Factors
Periods	1%	2%	3%	4%	5%	6%	7%
1	0.9901	0.9804	0.9709	0.9615	0.9524	0.9434	0.9346
2	0.9803	0.9612	0.9426	0.9246	0.907	0.89	0.8734
3	0.9707	0.9423	0.9151	0.889	0.8638	0.8396	0.8163
4	0.961	0.9238	0.8885	0.8548	0.8227	0.7921	0.7629
5	0.9515	0.9057	0.8626	0.8219	0.7835	0.7473	0.713
6	0.942	0.888	0.8375	0.7903	0.7462	0.705	0.6663
7	0.9327	0.8706	0.8131	0.7599	0.7107	0.6651	0.6228
8	0.9235	0.8535	0.7894	0.7307	0.6768	0.6274	0.582
9	0.9143	0.8368	0.7664	0.7026	0.6446	0.5919	0.5439
10	0.9053	0.8203	0.7441	0.6756	0.6139	0.5584	0.5083
11	0.8963	0.8043	0.7224	0.6496	0.5847	0.5268	0.4751
12	0.8874	0.7885	0.7014	0.6246	0.5568	0.497	0.444
13	0.8787	0.773	0.681	0.6006	0.5303	0.4688	0.415
14	0.87	0.7579	0.6611	0.5775	0.5051	0.4423	0.3878
15	0.8613	0.743	0.6419	0.5553	0.481	0.4173	0.3624

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Lecture Notes

Note that all the values are less than 1. Therefore, when multiplying a future value by these factors, the future value is discounted down to the present value. The table is used much the same way as the other time value of money tables.