Chapter Three: The Time Value of Money

Introduction
The concept of time value of money enables you to determine the value of a project or investment
based on future cash flows. Future cash flows are not determined with certainty rather there could
be variability which is referred to as risk. Considering time value of money adjusts the value of
money. One Birr today is not equal to one Birr you are going to obtain tomorrow. The extent of
the risk will affect the level of the required return on the investment. Investments are valued based
on the required rate of return.

The meaning/concept of TVM

Understanding the concept of time value of money helps you to record business transactions
properly as well as to make financial analysis and take business decisions. The time value concept
is applicable not only in business decisions but also for making personal financial decisions such
as saving plan or accumulation of money to acquire fixed asset or make investments in profitable
businesses. When you come to business, every investment decision and financing decision
accounts the concept of time value of money.

The time value of money is a technique for comparing investments made in today’s dollars with
payoffs in future dollars. It is a critical consideration in financial and investment decisions. The
time value of money has applications to compound interest, mortgage, leases, and investments.
The money you will get after a year does not hold the same value with the same money you are
holding it now. One Birr today is worth more than one Birr a year from now. Because money
today can be invested and earn interest. The difference in value is stated in the form of interest.
Interest is the money paid or earned for the use of money. Interest may be determined based on
either simple or compound interest. Simple and compound interests are applied depending on the
arrangements to calculate the future and present values of cash flows. These values of present and
future cash flows influence your investment and related decisions. Time Value of Money analysis
involves:
• What is Birr 1 worth 10 years from today (Future Value)?
• What is Birr 1 to be received in 10 years’ worth today (Present Value)?
Importance of present and future value concepts can be manifested in different areas such as in:

1
 • Determining the present value of promissory notes issued or received, and making proper
accounting record.
• Making buy or lease decisions such as fixed assets.
• Amortization of premiums and discounts on long term liabilities.
• Computing pensions and other post-retirement benefits.
• Determining the value of long-term productive assets acquired by issuing long-term debt
securities.
• Providing sinking funds for long-term debt.
• Installment contracts and others.

Now, you will study the computation of simple and compound interest. Interest may be computed
on single amount over a period of time or on regular flows of cash.
(1) Simple Interest: It is interest paid (earned) on only the original amount, or principal
borrowed (lent). Simple interest is computed using the three variables namely principal
amount, interest rate, and time. Hence, simple interest = Principal X Rate X Time.
(2) Compound interest: It is an interest that is earned on both principal and interest. Under
simple interest, interest is earned only on the original principal while compound interest
accounts both principal and interest. In the latter case, interest is earned each period on
the original principal and on the interest accumulated for the preceding periods.

The time value of money techniques

Generally there are two commonly used techniques to apply the TVM in financial decisions: the
Future value and Present values.

Future Value Techniques

To understand future value, we need to understand compounding first. Compounding is a
mathematical process of determining the value of a cash flow or cash flows at the final period. The
cash flow(s) could be a single cash flow, an annuity or uneven cash flows. Future value (FV) is
the amount to which a cash flow or cash flows will grow over a given period of time when
compounded at a given interest rate. Future value is always a direct result of the compounding
process.

2
 1. Future Value of a Single Amount

This is the amount to which a specified single cash flow will grow over a given period of time
when compounded at a given interest rate. The formula for computing future value of a single
cash flow is given as:

FVn = PV (1 + i)n
Where:
FVn = Future value at the end of n periods
PV = Present Value, or the principal amount
i = Interest rate per period
n= Number of periods
Or
FVn = PV (FVIFi,n)
Where:
(FVIFi, n) = The future value interest factor for i and n

Compound interest calculations are needed to determine future sums of money resulting from
an investment. Discounting, or the calculation of present value, which is inversely related to
compounding, is used to evaluate future cash flow associated with capital budgeting projects.
The concept of time value of money helps in arriving at the comparable value of the different
dollar amount arising at different points of time into equivalent values of a particular point of time,
present or future. The cash flows arising at different points of time can be made comparable by
using any one of the following:
• By compounding the present money to a future date i.e. by finding out the value of present
money.
• By discounting the future money to present date i.e. by finding out the present value (PV) of
future money.
Reasons of time preference of money:
• Risk: There is uncertainty about the receipt of money in future.
• Preference for present consumption: Most of the persons and companies have a
preference for present consumption may be due to urgency of need.
• Investment opportunities: Most of the persons and companies have preference for
present money because of availabilities of opportunities of investment for earning
additional cash flows.
2. Future value of annuity
3
 What is an annuity?
An annuity is a series of equal periodic rents (receipts, payments, withdrawals, and deposits) made
at fixed intervals for a specified number of periods. For a series of cash flows to be an annuity
four conditions should be fulfilled. First, the cash flows must be equal. Second, the interval
between any two cash flows must be fixed. Third, the interest rate applied for each period must
be constant. Last but not least, interest should be compounded during each period. If any one of
these conditions is missing, the cash flows cannot be an annuity.

The future value of an annuity addresses the question of how much will accumulate if a set amount
is paid into a fund for a number of years. Think of this as a “saving for retirement,” “saving for a
boat,” “saving for the children’s college,” kind of problem.

Basically, there are two types of annuities namely ordinary annuity and annuity due. Broadly
speaking, however, annuities are classified into three types:
i) ordinary annuity,
ii) annuity due, and
iii) deferred annuity
i) Future value of an Ordinary Annuity – An ordinary annuity is an annuity for which the cash
flows occur at the end of each period. Therefore, the future value of an ordinary annuity is the
amount computed at the period when exactly the final (nth) cash flow is made. Graphically, future
value of an ordinary annuity can be represented as follows:

0 1 2 ------------------ n

PMT1 PMT2 ---------------PMTn

The future value is computed at point n where PMTn is made.

 (1 + i) −1
n

FVAn = PMT  
 i 
Where:
FVAn = Future value of an ordinary annuity
PMT = Periodic payments
i = Interest rate per period
n = Number of periods

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 Or
FVAn = PMT (FVIFAi,n)
Where:
(FVIFAi, n) = the future value interest factor for an annuity
 (1 + i) −1
n

=  
 i 
The formula for computing the future value interest factor for an annuity at i interest per period,
and n periods is

(1 + 𝑖)𝑛 − 1
𝐹𝑉𝐴 = 𝑃𝑀𝑇 × 𝐹𝑉𝐼𝐹𝐴(𝑖, 𝑛) = 𝑃𝑀𝑇 ×
𝑖

ii) Future value of an Annuity Due. An annuity due is an annuity for which the payments occur
at the beginning of each period. Therefore, the future value of an annuity due is computed exactly
one period after the final payment is made. Graphically, this can be depicted as:
0 1 2 --------------------- n

PMT1 PMT2PMT3 -----------------------PMTn +1

The future value of an annuity due is computed at point n where PMTn + 1 is made
FVAD (Annuity due) = PMT (FVIFAi, n) (1 + i)
Or
 (1 + i) −1
n

= PMT   ( 1 + i)
 i 

iii) Future value of Deferred Annuity is an annuity for which the amount is computed two or
more period after the final payment is made.
0 1 2 ------------------n --------------n + x

PMT1 PMT2PMTn

The future value of a deferred annuity is computed at point n + x

FVDA (Deferred annuity) = PMT (FVIFAi, n) (1 + i)x
 (1 + i) −1
n

= PMT   (1 + i)
x

 i 

5
Where x = the number of periods after the final payment; and X  2.

3. Multi -period Compounding:

Till now, we have seen the cash flows will occur once in a year. But, the cash flows may occur
monthly, bi-monthly, quarterly, half yearly and yearly. In such instances we have to apply the
following formulae.
nm
 1
FVn = P 1 + 
 m

Present value techniques

Present value is the exact reversal of future value. It is the value today of a single cash flow, an
annuity or uneven cash flows. In other words, a present value is the amount of money that should
be invested today at a given interest rate over a specified period so that we can have the future
value. The process of computing the present value is called discounting
1. Present Value of a Single Amount
Determining future values of single amounts is important in many investing and lending situations.
The present value concept provides an answer to the question what the value today (the present
value) of an amount to be received or paid at some future date will be. It is the amount that should
be invested now at a given interest rate in order to equal the future value of a single amount. The
present value of future amounts is determined using a table prepared for this purpose or based on
the following formula:
n
 
PV = FVn n = FVn  1 
(1 + i )  1+ i 
Where:
PV = Present Value
FVn = Future value at the end of n periods
i = Interest rate per period
n = Number of periods
Or
PV = FVn (PVIFi, n)
Where:
(PVIFi, n) = The present value interest factor for i and n = 1/ (1 + i)n

6
2. Present Value of Future Mixed Cash Flows
Future cash flows may involve series of different cash amounts or equal cash flows. If the series
of cash flows contains differing amounts at different periods, each future amount should be
converted to present value applying the respective factors namely amount, time, and rate
separately. This may be done using this formula:
𝐹𝑉1 𝐹𝑉2 𝐹𝑉3 𝐹𝑉𝑛
𝑃𝑉 = 1
+ 2
+ 3
+ ⋯+
(1 + 𝑖) (1 + 𝑖) (1 + 𝑖) (1 + 𝑖)𝑛
On the other hand, when there are regular cash flows with equal amount and equal interval, the
computation of both present values and future values could be simplified. These regular cash flows
with equal amounts at regular interval are called Annuities as explained in preceding sections.
3. Present Values of Annuities

i) Present value of an Ordinary Annuity is a single amount of money that should be invested
now at a given interest rate in order to provide for an annuity for a certain number of future
periods.
 1 
1 − (1 + i )n  1 − (1 + i )− n 
PVAn = PMT   = PMT   = PMT (PVIFAi, n)
 i   i 
 
 
Where:
PVAn = The present value of an ordinary annuity
(PVIFAi, n) = The present value interest factor for an annuity

1 − (1 + i )
−n

=
i

ii) Present value of an Annuity Due – is the present value computed where exactly the first
payment is to be made. Graphically, this is shown below:

0 1 2 3 ---------------- n

PMT1 PMT2 PMTn

The present value of an annuity due is computed at point 1 while the present value of an
ordinary annuity is computed at point 0.

7
 1 − (1 + i ) − n 
PVAD = (Annuity due) = PMT   (1 + i) = PMT (PVIFAi, n) (1 + i)
 i 

iii) Present value of a Deferred Annuity is computed two or more periods before the first
payment is made.
1 − (1 + i ) − n  -x -x
PVDA (Deferred annuity) = PMT   (1 + i) = PMT (PVIFAi, n) (1 + i)
 i 

Where x is the number of periods between the date when he first payment is made and the date
the present value is computed.

iv. Application of PV of Annuities for Loan Payments

How can the present value of an annuity be used to compute loan payments? The following
equation can be used to calculate the present value of an annuity. Here what you have to understand
is that the value of an annuity is taken from the annuity table.
PVA = PMT X PVIFA (i, n)
Divide both sides of the equation by PVIFA (i, n).

𝑃𝑉𝐴
𝑃𝑀𝑇 =
𝑃𝑉𝐼𝐹𝐴(𝑖, 𝑛)
PVA is the amount of the loan. We are usually given an annual interest rate and number of years
for a loan. Since most loans require monthly payments, we would divide the annual rate by 12 to
get i, and multiply the length of the loan in years times 12 to get n. We can then use the present
value interest factor for an annuity (PVIFA) tables in Appendix B to find the value of the function
PVIFA (i, n).
v. Present Value of a Perpetuity

Perpetuity is an annuity with an indefinite cash flow. In perpetuity payments, are made
continuously forever. The present value of perpetuity is found by using the following formula:
PV (Perpetuity) = Payment = PMT
Interest rate i

8
Present Value of $1 Due at the End of n Periods
1
𝑃𝑉𝐼𝐹𝑖,𝑛 =
(1 + 𝑖)𝑛
PERIOD 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

1 .9901 .9804 .9709 .9615 .9524 .9434 .9346 .9259 .9174 .9091
2 .9803 .9612 .9426 .9246 .9070 .8900 .8734 .8573 .8417 .8264
3 .9706 .9423 .9151 .8890 .8638 .8396 .8163 .7938 .7722 .7513
4 .9610 .9238 .8885 .8548 .8227 .7921 .7629 .7350 .7084 .6830
5 .9515 .9057 .8626 .8219 .7835 .7473 .7130 .6806 .6499 .6209
6 .9420 .8880 .8375 .7903 .7462 .7050 .6663 .6302 .5963 .5645
7 .9327 .8706 .8131 .7599 .7107 .6651 .6227 .5835 .5470 .5132
8 .9235 .8535 .7894 .7307 .6768 .6274 .5820 .5403 .5019 .4665
9 .9143 .8368 .7664 .7026 .6446 .5919 .5439 .5002 .4604 .4241
10 .9053 .8203 .7441 .6756 .6139 .5584 .5083 .4632 .4224 .3855
11 .8963 .8043 .7224 .6496 .5847 .5268 .4751 .4289 .3875 .3505
12 .8874 .7885 .7014 .6246 .5568 .4970 .4440 .3971 .3555 .3186
13 .8787 .7730 .6810 .6006 .5303 .4688 .4150 .3677 .3262 .2897
14 .8700 .7579 .6611 .5775 .5051 .4423 .3878 .3405 .2992 .2633
15 .8613 .7430 .6419 .5553 .4810 .4173 .3624 .3152 .2745 .2394
16 .8528 .7284 .6232 .5339 .4581 .3936 .3387 .2919 .2519 .2176
17 .8444 .7142 .6050 .5134 .4363 .3714 .3166 .2703 .2311 .1978
18 .8360 .7002 .5874 .4936 .4155 .3503 .2959 .2502 .2120 .1799
19 .8277 .6864 .5703 .4746 .3957 .3305 .2765 .2317 .1945 .1635
20 .8195 .6730 .5537 .4564 .3769 .3118 .2584 .2145 .1784 .1486
21 .8114 .6598 .5375 .4388 .3589 .2942 .2415 .1987 .1637 .1351
22 .8034 .6468 .5219 .4220 .3418 .2775 .2257 .1839 .1502 .1228
23 .7954 .6342 .5067 .4057 .3256 .2618 .2109 .1703 .1378 .1117
24 .7876 .6217 .4919 .3901 .3101 .2470 .1971 .1577 .1264 .1015
25 .7798 .6095 .4776 .3751 .2953 .2330 .1842 .1460 .1160 .0923
26 .7720 .5976 .4637 .3607 .2812 .2198 .1722 .1352 .1064 .0839
27 .7644 .5859 .4502 .3468 .2678 .2074 .1609 .1252 .0976 .0763
28 .7568 .5744 .4371 .3335 .2551 .1956 .1504 .1159 .0895 .0693
29 .7493 .5631 .4243 .3207 .2429 .1846 .1406 .1073 .0822 .0630
30 .7419 .5521 .4120 .3083 .2314 .1741 .1314 .0994 .0754 .0573
35 .7059 .5000 .3554 .2534 .1813 .1301 .0937 .0676 .0490 .0356
40 .6717 .4529 .3066 .2083 .1420 .0972 .0668 .0460 .0318 .0221
45 .6391 .4102 .2644 .1712 .1113 .0727 .0476 .0313 .0207 .0137
50 .6080 .3715 .2281 .1407 .0872 .0543 .0339 .0213 .0134 .0085
55 .5785 .3365 .1968 .1157 .0683 .0406 .0242 .0145 .0087 .0053

Continued

PERIOD 12% 14% 15% 16% 18% 20% 24% 28% 32% 36%

1 .8929 .8772 .8696 .8621 .8475 .8333 .8065 .7813 .7576 .7353
2 .7972 .7695 .7561 .7432 .7182 .6944 .6504 .6104 .5739 .5407
3 .7118 .6750 .6575 .6407 .6086 .5787 .5245 .4768 .4348 .3975
4 .6355 .5921 .5718 .5523 .5158 .4823 .4230 .3725 .3294 .2923
5 .5674 .5194 .4972 .4761 .4371 .4019 .3411 .2910 .2495 .2149
6 .5066 .4556 .4323 .4104 .3704 .3349 .2751 .2274 .1890 .1580
7 .4523 .3996 .3759 .3538 .3139 .2791 .2218 .1776 .1432 .1162
8 .4039 .3506 .3269 .3050 .2660 .2326 .1789 .1388 .1085 .0854
9 .3606 .3075 .2843 .2630 .2255 .1938 .1443 .1084 .0822 .0628

9
10 .3220 .2697 .2472 .2267 .1911 .1615 .1164 .0847 .0623 .0462
11 .2875 .2366 .2149 .1954 .1619 .1346 .0938 .0662 .0472 .0340
12 .2567 .2076 .1869 .1685 .1372 .1122 .0757 .0517 .0357 .0250
13 .2292 .1821 .1625 .1452 .1163 .0935 .0610 .0404 .0271 .0184
14 .2046 .1597 .1413 .1252 .0985 .0779 .0492 .0316 .0205 .0135
15 .1827 .1401 .1229 .1079 .0835 .0649 .0397 .0247 .0155 .0099
16 .1631 .1229 .1069 .0930 .0708 .0541 .0320 .0193 .0118 .0073
17 .1456 .1078 .0929 .0802 .0600 .0451 .0258 .0150 .0089 .0054
18 .1300 .0946 .0808 .0691 .0508 .0376 .0208 .0118 .0068 .0039
19 .1161 .0829 .0703 .0596 .0431 .0313 .0168 .0092 .0051 .0029
20 .1037 .0728 .0611 .0514 .0365 .0261 .0135 .0072 .0039 .0021
21 .0926 .0638 .0531 .0443 .0309 .0217 .0109 .0056 .0029 .0016
22 .0826 .0560 .0462 .0382 .0262 .0181 .0088 .0044 .0022 .0012
23 .0738 .0491 .0402 .0329 .0222 .0151 .0071 .0034 .0017 .0008
24 .0659 .0431 .0349 .0284 .0188 .0126 .0057 .0027 .0013 .0006
25 .0588 .0378 .0304 .0245 .0160 .0105 .0046 .0021 .0010 .0005
26 .0525 .0331 .0264 .0211 .0135 .0087 .0037 .0016 .0007 .0003
27 .0469 .0291 .0230 .0182 .0115 .0073 .0030 .0013 .0006 .0002
28 .0419 .0255 .0200 .0157 .0097 .0061 .0024 .0010 .0004 .0002
29 .0374 .0224 .0174 .0135 .0082 .0051 .0020 .0008 .0003 .0001
30 .0334 .0196 .0151 .0116 .0070 .0042 .0016 .0006 .0002 .0001
35 .0189 .0102 .0075 .0055 .0030 .0017 .0005 .0002 .0001 *
40 .0107 .0053 .0037 .0026 .0013 .0007 .0002 .0001 * *
45 .0061 .0027 .0019 .0013 .0006 .0003 .0001 * * *
50 .0035 .0014 .0009 .0006 .0003 .0001 * * * *
55 .0020 .0007 .0005 .0003 .0001 * * * * *

Present Value of an Annuity of $1 per Period for n Periods

Equation:
𝑛 1
1 1−
(1 + 𝑖)𝑛 1 1
𝑃𝑉𝐼𝐹𝐴𝑖,𝑛 =∑ 𝑡
= = −
(1 + 𝑖) 𝑖 𝑖 𝑖(1 + 𝑖)𝑛
𝑡=1

NUMBER
OF 1% 2% 3% 4% 5% 6% 7% 8% 9%
PERIODS
1 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174
2 1.9704 1.9416 1.9135 1.8861 1.8594 1.8334 1.8080 1.7833 1.7591
3 2.9410 2.8839 2.8286 2.7751 2.7232 2.6730 2.6243 2.5771 2.5313
4 3.9020 3.8077 3.7171 3.6299 3.5460 3.4651 3.3872 3.3121 3.2397
5 4.8534 4.7135 4.5797 4.4518 4.3295 4.2124 4.1002 3.9927 3.8897
6 5.7955 5.6014 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 4.4859
7 6.7282 6.4720 6.2303 6.0021 5.7864 5.5824 5.3893 5.2064 5.0330
8 7.6517 7.3255 7.0197 6.7327 6.4632 6.2098 5.9713 5.7466 5.5348
9 8.5660 8.1622 7.7861 7.4353 7.1078 6.8017 6.5152 6.2469 5.9952
10 9.4713 8.9826 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.4177
11 10.3676 9.7868 9.2526 8.7605 8.3064 7.8869 7.4987 7.1390 6.8052
12 11.2551 10.5753 9.9540 9.3851 8.8633 8.3838 7.9427 7.5361 7.1607
13 12.1337 11.3484 10.6350 9.9856 9.3936 8.8527 8.3577 7.9038 7.4869
14 13.0037 12.1062 11.2961 10.5631 9.8986 9.2950 8.7455 8.2442 7.7862
15 13.8651 12.8493 11.9379 11.1184 10.3797 9.7122 9.1079 8.5595 8.0607
16 14.7179 13.5777 12.5611 11.6523 10.8378 10.1059 9.4466 8.8514 8.3126
17 15.5623 14.2919 13.1661 12.1657 11.2741 10.4773 9.7632 9.1216 8.5436
18 16.3983 14.9920 13.7535 12.6593 11.6896 10.8276 10.0591 9.3719 8.7556

10
19 17.2260 15.6785 14.3238 13.1339 12.0853 11.1581 10.3356 9.6036 8.9501
20 18.0456 16.3514 14.8775 13.5903 12.4622 11.4699 10.5940 9.8181 9.1285
21 18.8570 17.0112 15.4150 14.0292 12.8212 11.7641 10.8355 10.0168 9.2922
22 19.6604 17.6580 15.9369 14.4511 13.1630 12.0416 11.0612 10.2007 9.4424
23 20.4558 18.2922 16.4436 14.8568 13.4886 12.3034 11.2722 10.3711 9.5802
24 21.2434 18.9139 16.9355 15.2470 13.7986 12.5504 11.4693 10.5288 9.7066
25 22.0232 19.5235 17.4131 15.6221 14.0939 12.7834 11.6536 10.6748 9.8226
26 22.7952 20.1210 17.8768 15.9828 14.3752 13.0032 11.8258 10.8100 9.9290
27 23.5596 20.7069 18.3270 16.3296 14.6430 13.2105 11.9867 10.9352 10.0266
28 24.3164 21.2813 18.7641 16.6631 14.8981 13.4062 12.1371 11.0511 10.1161
29 25.0658 21.8444 19.1885 16.9837 15.1411 13.5907 12.2777 11.1584 10.1983
30 25.8077 22.3965 19.6004 17.2920 15.3725 13.7648 12.4090 11.2578 10.2737
35 29.4086 24.9986 21.4872 18.6646 16.3742 14.4982 12.9477 11.6546 10.5668
40 32.8347 27.3555 23.1148 19.7928 17.1591 15.0463 13.3317 11.9246 10.7574
45 36.0945 29.4902 24.5187 20.7200 17.7741 15.4558 13.6055 12.1084 10.8812
50 39.1961 31.4236 25.7298 21.4822 18.2559 15.7619 13.8007 12.2335 10.9617
55 42.1472 33.1748 26.7744 22.1086 18.6335 15.9905 13.9399 12.3186 11.0140

Continued

NUMBER
OF 10% 12% 14% 15% 16% 18% 20% 24% 28% 32%
PERIODS
1 0.9091 0.8929 0.8772 0.8696 0.8621 0.8475 0.8333 0.8065 0.7813 0.7576
2 1.7355 1.6901 1.6467 1.6257 1.6052 1.5656 1.5278 1.4568 1.3916 1.3315
3 2.4869 2.4018 2.3216 2.2832 2.2459 2.1743 2.1065 1.9813 1.8684 1.7663
4 3.1699 3.0373 2.9137 2.8550 2.7982 2.6901 2.5887 2.4043 2.2410 2.0957
5 3.7908 3.6048 3.4331 3.3522 3.2743 3.1272 2.9906 2.7454 2.5320 2.3452
6 4.3553 4.1114 3.8887 3.7845 3.6847 3.4976 3.3255 3.0205 2.7594 2.5342
7 4.8684 4.5638 4.2883 4.1604 4.0386 3.8115 3.6046 3.2423 2.9370 2.6775
8 5.3349 4.9676 4.6389 4.4873 4.3436 4.0776 3.8372 3.4212 3.0758 2.7860
9 5.7590 5.3282 4.9464 4.7716 4.6065 4.3030 4.0310 3.5655 3.1842 2.8681
10 6.1446 5.6502 5.2161 5.0188 4.8332 4.4941 4.1925 3.6819 3.2689 2.9304
11 6.4951 5.9377 5.4527 5.2337 5.0286 4.6560 4.3271 3.7757 3.3351 2.9776
12 6.8137 6.1944 5.6603 5.4206 5.1971 4.7932 4.4392 3.8514 3.3868 3.0133
13 7.1034 6.4235 5.8424 5.5831 5.3423 4.9095 4.5327 3.9124 3.4272 3.0404
14 7.3667 6.6282 6.0021 5.7245 5.4675 5.0081 4.6106 3.9616 3.4587 3.0609
15 7.6061 6.8109 6.1422 5.8474 5.5755 5.0916 4.6755 4.0013 3.4834 3.0764
16 7.8237 6.9740 6.2651 5.9542 5.6685 5.1624 4.7296 4.0333 3.5026 3.0882
17 8.0216 7.1196 6.3729 6.0472 5.7487 5.2223 4.7746 4.0591 3.5177 3.0971
18 8.2014 7.2497 6.4674 6.1280 5.8178 5.2732 4.8122 4.0799 3.5294 3.1039
19 8.3649 7.3658 6.5504 6.1982 5.8775 5.3162 4.8435 4.0967 3.5386 3.1090
20 8.5136 7.4694 6.6231 6.2593 5.9288 5.3527 4.8696 4.1103 3.5458 3.1129
21 8.6487 7.5620 6.6870 6.3125 5.9731 5.3837 4.8913 4.1212 3.5514 3.1158
22 8.7715 7.6446 6.7429 6.3587 6.0113 5.4099 4.9094 4.1300 3.5558 3.1180
23 8.8832 7.7184 6.7921 6.3988 6.0442 5.4321 4.9245 4.1371 3.5592 3.1197
24 8.9847 7.7843 6.8351 6.4338 6.0726 5.4509 4.9371 4.1428 3.5619 3.1210
25 9.0770 7.8431 6.8729 6.4641 6.0971 5.4669 4.9476 4.1474 3.5640 3.1220
26 9.1609 7.8957 6.9061 6.4906 6.1182 5.4804 4.9563 4.1511 3.5656 3.1227
27 9.2372 7.9426 6.9352 6.5135 6.1364 5.4919 4.9636 4.1542 3.5669 3.1233
28 9.3066 7.9844 6.9607 6.5335 6.1520 5.5016 4.9697 4.1566 3.5679 3.1237
29 9.3696 8.0218 6.9830 6.5509 6.1656 5.5098 4.9747 4.1585 3.5687 3.1240
30 9.4269 8.0552 7.0027 6.5660 6.1772 5.5168 4.9789 4.1601 3.5693 3.1242
35 9.6442 8.1755 7.0700 6.6166 6.2153 5.5386 4.9915 4.1644 3.5708 3.1248
40 9.7791 8.2438 7.1050 6.6418 6.2335 5.5482 4.9966 4.1659 3.5712 3.1250
45 9.8628 8.2825 7.1232 6.6543 6.2421 5.5523 4.9986 4.1664 3.5714 3.1250

11
50 9.9148 8.3045 7.1327 6.6605 6.2463 5.5541 4.9995 4.1666 3.5714 3.1250
55 9.9471 8.3170 7.1376 6.6636 6.2482 5.5549 4.9998 4.1666 3.5714 3.1250

Future Value of $1 at the End of n Periods

Equation :𝐹𝑉𝐼𝐹𝑖,𝑛 = (1 + 𝑖)𝑛

TABLE
VALUE
PERIOD 1% 2% 3% 4% 5% 6% 8% 9% 10%
7%
1 1.0100 1.0200 1.0300 1.0400 1.0500 1.0600 1.0700 1.0800 1.0900 1.1000
2 1.0201 1.0404 1.0609 1.0816 1.1025 1.1236 1.1449 1.1664 1.1881 1.2100
3 1.0303 1.0612 1.0927 1.1249 1.1576 1.1910 1.2250 1.2597 1.2950 1.3310
4 1.0406 1.0824 1.1255 1.1699 1.2155 1.2625 1.3108 1.3605 1.4116 1.4641
5 1.0510 1.1041 1.1593 1.2167 1.2763 1.3382 1.4026 1.4693 1.5386 1.6105
6 1.0615 1.1262 1.1941 1.2653 1.3401 1.4185 1.5007 1.5869 1.6771 1.7716
7 1.0721 1.1487 1.2299 1.3159 1.4071 1.5036 1.6058 1.7138 1.8280 1.9487
8 1.0829 1.1717 1.2668 1.3686 1.4775 1.5938 1.7182 1.8509 1.9926 2.1436
9 1.0937 1.1951 1.3048 1.4233 1.5513 1.6895 1.8385 1.9990 2.1719 2.3579
10 1.1046 1.2190 1.3439 1.4802 1.6289 1.7908 1.9672 2.1589 2.3674 2.5937
11 1.1157 1.2434 1.3842 1.5395 1.7103 1.8983 2.1049 2.3316 2.5804 2.8531
12 1.1268 1.2682 1.4258 1.6010 1.7959 2.0122 2.2522 2.5182 2.8127 3.1384
13 1.1381 1.2936 1.4685 1.6651 1.8856 2.1329 2.4098 2.7196 3.0658 3.4523
14 1.1495 1.3195 1.5126 1.7317 1.9799 2.2609 2.5785 2.9372 3.3417 3.7975
15 1.1610 1.3459 1.5580 1.8009 2.0789 2.3966 2.7590 3.1722 3.6425 4.1772
16 1.1726 1.3728 1.6047 1.8730 2.1829 2.5404 2.9522 3.4259 3.9703 4.5950
17 1.1843 1.4002 1.6528 1.9479 2.2920 2.6928 3.1588 3.7000 4.3276 5.0545
18 1.1961 1.4282 1.7024 2.0258 2.4066 2.8543 3.3799 3.9960 4.7171 5.5599
19 1.2081 1.4568 1.7535 2.1068 2.5270 3.0256 3.6165 4.3157 5.1417 6.1159
20 1.2202 1.4859 1.8061 2.1911 2.6533 3.2071 3.8697 4.6610 5.6044 6.7275
21 1.2324 1.5157 1.8603 2.2788 2.7860 3.3996 4.1406 5.0338 6.1088 7.4002
22 1.2447 1.5460 1.9161 2.3699 2.9253 3.6035 4.4304 5.4365 6.6586 8.1403
23 1.2572 1.5769 1.9736 2.4647 3.0715 3.8197 4.7405 5.8715 7.2579 8.9543
24 1.2697 1.6084 2.0328 2.5633 3.2251 4.0489 5.0724 6.3412 7.9111 9.8497
25 1.2824 1.6406 2.0938 2.6658 3.3864 4.2919 5.4274 6.8485 8.6231 10.835
26 1.2953 1.6734 2.1566 2.7725 3.5557 4.5494 5.8074 7.3964 9.3992 11.918
27 1.3082 1.7069 2.2213 2.8834 3.7335 4.8223 6.2139 7.9881 10.245 13.110
28 1.3213 1.7410 2.2879 2.9987 3.9201 5.1117 6.6488 8.6271 11.167 14.421
29 1.3345 1.7758 2.3566 3.1187 4.1161 5.4184 7.1143 9.3173 12.172 15.863
30 1.3478 1.8114 2.4273 3.2434 4.3219 5.7435 7.6123 10.063 13.268 17.449
40 1.4889 2.2080 3.2620 4.8010 7.0400 10.286 14.974 21.725 31.409 45.259
50 1.6446 2.6916 4.3839 7.1067 11.467 18.420 29.457 46.902 74.358 117.39

60 1.8167 3.2810 5.8916 10.520 18.679 32.988 57.946 101.26 176.03 304.48

12
Continued

PERIOD 12% 14% 15% 16% 18% 20% 24% 28% 32% 36%

1 1.1200 1.1400 1.1500 1.1600 1.1800 1.2000 1.2400 1.2800 1.3200 1.3600
2 1.2544 1.2996 1.3225 1.3456 1.3924 1.4400 1.5376 1.6384 1.7424 1.8496
3 1.4049 1.4815 1.5209 1.5609 1.6430 1.7280 1.9066 2.0972 2.3000 2.5155
4 1.5735 1.6890 1.7490 1.8106 1.9388 2.0736 2.3642 2.6844 3.0360 3.4210
5 1.7623 1.9254 2.0114 2.1003 2.2878 2.4883 2.9316 3.4360 4.0075 4.6526
6 1.9738 2.1950 2.3131 2.4364 2.6996 2.9860 3.6352 4.3980 5.2899 6.3275
7 2.2107 2.5023 2.6600 2.8262 3.1855 3.5832 4.5077 5.6295 6.9826 8.6054
8 2.4760 2.8526 3.0590 3.2784 3.7589 4.2998 5.5895 7.2058 9.2170 11.703
9 2.7731 3.2519 3.5179 3.8030 4.4355 5.1598 6.9310 9.2234 12.166 15.917
10 3.1058 3.7072 4.0456 4.4114 5.2338 6.1917 8.5944 11.806 16.060 21.647
11 3.4785 4.2262 4.6524 5.1173 6.1759 7.4301 10.657 15.112 21.199 29.439
12 3.8960 4.8179 5.3503 5.9360 7.2876 8.9161 13.215 19.343 27.983 40.037
13 4.3635 5.4924 6.1528 6.8858 8.5994 10.699 16.386 24.759 36.937 54.451
14 4.8871 6.2613 7.0757 7.9875 10.147 12.839 20.319 31.691 48.757 74.053
15 5.4736 7.1379 8.1371 9.2655 11.974 15.407 25.196 40.565 64.359 100.71
16 6.1304 8.1372 9.3576 10.748 14.129 18.488 31.243 51.923 84.954 136.97
17 6.8660 9.2765 10.761 12.468 16.672 22.186 38.741 66.461 112.14 186.28
18 7.6900 10.575 12.375 14.463 19.673 26.623 48.039 85.071 148.02 253.34
19 8.6128 12.056 14.232 16.777 23.214 31.948 59.568 108.89 195.39 344.54
20 9.6463 13.743 16.367 19.461 27.393 38.338 73.864 139.38 257.92 468.57
21 10.804 15.668 18.822 22.574 32.324 46.005 91.592 178.41 340.45 637.26
22 12.100 17.861 21.645 26.186 38.142 55.206 113.57 228.36 449.39 866.67
23 13.552 20.362 24.891 30.376 45.008 66.247 140.83 292.30 593.20 1178.7
24 15.179 23.212 28.625 35.236 53.109 79.497 174.63 374.14 783.02 1603.0
25 17.000 26.462 32.919 40.874 62.669 95.396 216.54 478.90 1033.6 2180.1
26 19.040 30.167 37.857 47.414 73.949 114.48 268.51 613.00 1364.3 2964.9
27 21.325 34.390 43.535 55.000 87.260 137.37 332.95 784.64 1800.9 4032.3
28 23.884 39.204 50.066 63.800 102.97 164.84 412.86 1004.3 2377.2 5483.9
29 26.750 44.693 57.575 74.009 121.50 197.81 511.95 1285.6 3137.9 7458.1
30 29.960 50.950 66.212 85.850 143.37 237.38 634.82 1645.5 4142.1 10143.
40 93.051 188.88 267.86 378.72 750.38 1469.8 5455.9 19427. 66521. *
50 289.00 700.23 1083.7 1670.7 3927.4 9100.4 46890. * * *
60 897.60 2595.9 4384.0 7370.2 20555. 56348. * * * *

13
Future Value of an Annuity of $1 per Period for n Periods

Equation:
𝑛
(1 + 𝑖)𝑛 − 1
𝐹𝑉𝐼𝐹𝐴𝑖,𝑛 = ∑(1 + 𝑖)𝑛−𝑡 =
𝑖
𝑡=1

NUMBER
OF 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
PERIODS
1 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
2 2.0100 2.0200 2.0300 2.0400 2.0500 2.0600 2.0700 2.0800 2.0900 2.1000
3 3.0301 3.0604 3.0909 3.1216 3.1525 3.1836 3.2149 3.2464 3.2781 3.3100
4 4.0604 4.1216 4.1836 4.2465 4.3101 4.3746 4.4399 4.5061 4.5731 4.6410
5 5.1010 5.2040 5.3091 5.4163 5.5256 5.6371 5.7507 5.8666 5.9847 6.1051
6 6.1520 6.3081 6.4684 6.6330 6.8019 6.9753 7.1533 7.3359 7.5233 7.7156
7 7.2135 7.4343 7.6625 7.8983 8.1420 8.3938 8.6540 8.9228 9.2004 9.4872
8 8.2857 8.5830 8.8923 9.2142 9.5491 9.8975 10.260 10.637 11.028 11.436
9 9.3685 9.7546 10.159 10.583 11.027 11.491 11.978 12.488 13.021 13.579
10 10.462 10.950 11.464 12.006 12.578 13.181 13.816 14.487 15.193 15.937
11 11.567 12.169 12.808 13.486 14.207 14.972 15.784 16.645 17.560 18.531
12 12.683 13.412 14.192 15.026 15.917 16.870 17.888 18.977 20.141 21.384
13 13.809 14.680 15.618 16.627 17.713 18.882 20.141 21.495 22.953 24.523
14 14.947 15.974 17.086 18.292 19.599 21.015 22.550 24.215 26.019 27.975
15 16.097 17.293 18.599 20.024 21.579 23.276 25.129 27.152 29.361 31.772
16 17.258 18.639 20.157 21.825 23.657 25.673 27.888 30.324 33.003 35.950
17 18.430 20.012 21.762 23.698 25.840 28.213 30.840 33.750 36.974 40.545
18 19.615 21.412 23.414 25.645 28.132 30.906 33.999 37.450 41.301 45.599
19 20.811 22.841 25.117 27.671 30.539 33.760 37.379 41.446 46.018 51.159
20 22.019 24.297 26.870 29.778 33.066 36.786 40.995 45.762 51.160 57.275
21 23.239 25.783 28.676 31.969 35.719 39.993 44.865 50.423 56.765 64.002
22 24.472 27.299 30.537 34.248 38.505 43.392 49.006 55.457 62.873 71.403
23 25.716 28.845 32.453 36.618 41.430 46.996 53.436 60.893 69.532 79.543
24 26.973 30.422 34.426 39.083 44.502 50.816 58.177 66.765 76.790 88.497
25 28.243 32.030 36.459 41.646 47.727 54.865 63.249 73.106 84.701 98.347
26 29.526 33.671 38.553 44.312 51.113 59.156 68.676 79.954 93.324 109.18
27 30.821 35.344 40.710 47.084 54.669 63.706 74.484 87.351 102.72 121.10
28 32.129 37.051 42.931 49.968 58.403 68.528 80.698 95.339 112.97 134.21
29 33.450 38.792 45.219 52.966 62.323 73.640 87.347 103.97 124.14 148.63
30 34.785 40.568 47.575 56.085 66.439 79.058 94.461 113.28 136.31 164.49
40 48.886 60.402 75.401 95.026 120.80 154.76 199.64 259.06 337.88 442.59
50 64.463 84.579 112.80 152.67 209.35 290.34 406.53 573.77 815.08 1163.9

60 81.670 114.05 163.05 237.99 353.58 533.13 813.52 1253.2 1944.8 3034.8

14
Continued

NUMBER
OF 12% 14% 15% 16% 18% 20% 24% 28% 32% 36%
PERIODS
1 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
2 2.1200 2.1400 2.1500 2.1600 2.1800 2.2000 2.2400 2.2800 2.3200 2.3600
3 3.3744 3.4396 3.4725 3.5056 3.5724 3.6400 3.7776 3.9184 4.0624 4.2096
4 4.7793 4.9211 4.9934 5.0665 5.2154 5.3680 5.6842 6.0156 6.3624 6.7251
5 6.3528 6.6101 6.7424 6.8771 7.1542 7.4416 8.0484 8.6999 9.3983 10.146
6 8.1152 8.5355 8.7537 8.9775 9.4420 9.9299 10.980 12.136 13.406 14.799
7 10.089 10.730 11.067 11.414 12.142 12.916 14.615 16.534 18.696 21.126
8 12.300 13.233 13.727 14.240 15.327 16.499 19.123 22.163 25.678 29.732
9 14.776 16.085 16.786 17.519 19.086 20.799 24.712 29.369 34.895 41.435
10 17.549 19.337 20.304 21.321 23.521 25.959 31.643 38.593 47.062 57.352
11 20.655 23.045 24.349 25.733 28.755 32.150 40.238 50.398 63.122 78.998
12 24.133 27.271 29.002 30.850 34.931 39.581 50.895 65.510 84.320 108.44
13 28.029 32.089 34.352 36.786 42.219 48.497 64.110 84.853 112.30 148.47
14 32.393 37.581 40.505 43.672 50.818 59.196 80.496 109.61 149.24 202.93
15 37.280 43.842 47.580 51.660 60.965 72.035 100.82 141.30 198.00 276.98
16 42.753 50.980 55.717 60.925 72.939 87.442 126.01 181.87 262.36 377.69
17 48.884 59.118 65.075 71.673 87.068 105.93 157.25 233.79 347.31 514.66
18 55.750 68.394 75.836 84.141 103.74 128.12 195.99 300.25 459.45 700.94
19 63.440 78.969 88.212 98.603 123.41 154.74 244.03 385.32 607.47 954.28
20 72.052 91.025 102.44 115.38 146.63 186.69 303.60 494.21 802.86 1298.8
21 81.699 104.77 118.81 134.84 174.02 225.03 377.46 633.59 1060.8 1767.4
22 92.503 120.44 137.63 157.41 206.34 271.03 469.06 812.00 1401.2 2404.7
23 104.60 138.30 159.28 183.60 244.49 326.24 582.63 1040.4 1850.6 3271.3
24 118.16 158.66 184.17 213.98 289.49 392.48 723.46 1332.7 2443.8 4450.0
25 133.33 181.87 212.79 249.21 342.60 471.98 898.09 1706.8 3226.8 6053.0
26 150.33 208.33 245.71 290.09 405.27 567.38 1114.6 2185.7 4260.4 8233.1
27 169.37 238.50 283.57 337.50 479.22 681.85 1383.1 2798.7 5624.8 11198.0
28 190.70 272.89 327.10 392.50 566.48 819.22 1716.1 3583.3 7425.7 15230.3
29 214.58 312.09 377.17 456.30 669.45 984.07 2129.0 4587.7 9802.9 20714.2
30 241.33 356.79 434.75 530.31 790.95 1181.9 2640.9 5873.2 12941. 28172.3
40 767.09 1342.0 1779.1 2360.8 4163.2 7343.9 22729. 69377. * *
50 2400.0 4994.5 7217.7 10436. 21813. 45497. * * * *
60 7471.6 18535. 29220. 46058. * * * * * *

15