Tips
PV = "at the end of the next … year"
FV= "at the end of … year"
1 The following are exercises in future (terminal) values:
a) Compound Interest of FV, Find FV
r (interest rate) (%)
n (period) in this case is years
PV (Present Value) (initial deposit) ($)
FV = PV (1 + r)n
b) Compound interest of FV & Ordinary Annuity of FVAn
r or i (interest rate) (%)
n (period) in this case is years
PV (Present Value) (initial deposit) ($)
R ($)
FV = PV (1 + r)n
FVAn = R([(1+i)n-1]/i)
FV + FVAn = … ?
2 Ordinary Annuity of PV, Find PVAn
i (interest rate) (%)
n (period) in this case is years
R ($)
PVAn = R[(1-[1/(1+i)n])/i]
3 Ordinary Annuity of Annually Withdrawal
i (interest rate) (%)
n (period) in this case is year
R ($)
P = (1-(1+r)-n/i)/R
Conclusion: So, Joe will be withdrawing $2981,93 annually for 12 years
9 Compound Interest of FV of the Cash Flows below, Find total PV
n (period) in this case is years
R ($)
PV = R(1/(1+i)n)
Total PV = … ?
12 Ordinary Annuity of PV, Find PVAn
i (interest rate) (%)
n (period) in this case is years
R ($)
PVAn = R[(1-[1/(1+i)n])/i]
1,000,000,000
10
0.025
(I) (II) (III)
100% 10% 0%
3 3 3
100 100 100
Err:509 133.1 100
(I) (II) (III)
10% 5% 0%
5 5 5
500 500 500
100 100 100
805.255 638.14078125 500
610.510000000001 552.563125 #DIV/0!
1415.765 1190.7039063 500
(I) (II)
4% 25%
3 3
500 500
1387.54551661356 976
6%
12
25000
2981.93
y for 12 years
14% 14% 14% 14% 14%
1 2 3 4 5
1200 2000 2400 1900 1600
1052.63157894737 1538.9350569 1619.931638885 1124.952527 830.98986298
8663.68921316104
a. b. c.
5% 10% 10%
15 15 5
10000 10000 30000
103796.580381806 76060.795063 113723.603082
6% 60000000 1060000000
1000000000 5 5.076
60000000 304560000 5380560000
1 2 3 4 5
30,000,000 30,000,000 30,000,000 30,000,000 30,000,000
30,000,000 30,000,000 30,000,000 30,000,000 30,000,000
29,268,293 28,554,432 27,857,982 27,178,519 26,515,629
1,043,760,320
14% 14% 14% 14% 14%
6 7 8 9 10
1400 1400 1400 1400 1400
637.82116676 559.49225154 490.78267679 430.51111999 377.6413333265
6 7 8 9 10
30,000,000 30,000,000 30,000,000 30,000,000 30,000,000
1,000,000,000
30,000,000 30,000,000 30,000,000 30,000,000 1,030,000,000
25,868,906 25,237,957 24,622,397 24,021,851 804,634,354
