Future Value One Cash Flow

Present Value
Interest/Discount Rate
Number of Periods
Future Value

$1,000
0.05
5
1276.28 =B2*(1+B3)^B4
$1,276.28 =FV(B3,B4,,-B2,1)
Example 2
Future Value One Cash Flow

Present Value
Interest/Discount Rate
Number of Periods
Future Value

$1,000
0.05
10
1628.89 =B11*(1+B12)^B13
$1,628.89 =FV(B12,B13,,-B11,1)
Example 3
Future Value One Cash Flow

Present Value
Interest/Discount Rate
Number of Periods
Future Value

$10
0.055
200
447189.84 =B20*(1+B21)^B22
$447,189.84 =FV(B21,B22,,-B20,1)

General Growth
Future Value One Cash Flow
Present Value
$3,000,000
Interest/Discount Rate
0.15
Number of Periods
5
Future Value
6034071.56 =B29*(1+B30)^B31
$6,034,071.56 =FV(B30,B31,,-B29,1)

Present Value
Interest/Discount Rate
Number of Periods
Future Value

Present Value
Interest/Discount Rate
Number of Periods
Future Value

Present Value
Interest/Discount Rate
Number of Periods
Future Value

Present Value One Cash Flow

40540.34 =D5/(1+D3)^D4
0.08
17
$150,000

Example 5 Discount Rate

1000
0.03714
5
1200

$40,540.34 =PV(D3,D4,,-D5,1)
another example
Present Value One Cash Flow
9345.794393 =D14/(1+D12)^D13
0.07
1
$10,000

Example 6
Discount Rate
10000
0.1225
6
20000

$9,345.79 =PV(D12,D13,,-D14,1)
Example 3
Present Value One Cash Flow
10000.00 =D23/(1+D21)^D22
0.07
10
$19,672
$10,000.00 =PV(D21,D22,,-D23,1)
Important Relationship I,II -A
Present Value One Cash Flow
310.46 =D32/(1+D30)^D31
0.1
5
$500
$310.46 =PV(D30,D31,,-D32,1)
Important Relationship I -B
Present Value One Cash Flow
192.77 =D41/(1+D39)^D40
0.1
10
$500
$192.77 =PV(D39,D40,,-D41,1)
Important Relationship II -B
Present Value One Cash Flow
248.59 =D50/(1+D48)^D49
0.15
5
$500
$248.59 =PV(D48,D49,,-D50,1)

Example 7
Discount Rate
5000
0.1727
17
75000

Chapter 6 - Present Value with Daily Compounding

12718.56366 =D60/(1+D58)^D59
0.000150685 =0.055/365
1095 =3*365
$15,000
$12,718.56 =PV(D58,D59,,-D60,1)

e 5 Discount Rate
=(F5/F2)^(1/F4)-1

Number of Periods - Example

$15,000
0.1
3.02 = LOG(H5/H2)/LOG(1 + H3)
$20,000

Example 8
Time
$15,000
=(F14/F11)^(1/F13)-1
0.075
5.14 = LOG(H14/H11)/LOG(1 + H12)
$21,750

=(F23/F20)^(1/F22)-1

Finding EAR
Computing EARs - Example
APR
0.12
# of compounding periods
12
EAR
0.126825 =(1+B3/B4)^B4-1

Finding APR
APR - Example
0.11386552 =E4*((1+E5)^(1/E4)-1)
12
0.12

another account
APR
# of compounding periods
EAR

Loan from Your Tax preparation Service

0.05387931 =50/(978-50)
0.01764654 =(1+E10)^(1/3)-1
0.91761998 =52*(E11)
1.48337266 =(1+E11)^52-1

0.12
4
0.125509 =(1+B10/B11)^B11-1

5.25%, with daily compounding

APR
0.0525
# of compounding periods
365
EAR
0.053899 =(1+B18/B19)^B19-1

5.3% with semiannual compounding

APR
0.053
# of compounding periods
2
EAR
0.053702 =(1+B26/B27)^B27-1

0.15
0.00288462 =E15/52
1.00867883 =(1+E16)^3
$5,761.14 =50/(E17-1)

Continuous Compounding
Example
0.07
0.072508181 =EXP(H3)-1

eparation Service
3 week effective rate
1 week effective rate
APR
EAR=
APR
1 week effective rate
3 week effective rate
loan anount

148.34%

Example 6.5
Present Value
Periodic Cash Flow
Interest/Discount Rate
Number of Periods
Future Value
Present Value Excel
Future Value Excel

Present and Future Values of an annuity

$23,999.54 =(B4/B5)*(1-(1+B5)^(-B6))
$632.00
0.01
48
$38,692.688
=(B4/B5)*((1+B5)^B6-1)
$23,999.54 =PV(B5,B6,-B4)
$38,692.69 =FV(B5,B6,-B4)

Annuity Sweepstakes Example

Present and Future Values of an annuity
Present Value
$5,124,150.29 =(B17/B18)*(1-(1+B18)^(-B19))
Periodic Cash Flow
$333,333.33
Interest/Discount Rate
0.05
Number of Periods
30
Future Value
$22,146,282.28
=(B17/B18)*((1+B18)^B19-1)
Present Value Excel
Future Value Excel

$5,124,150.29 =PV(B18,B19,-B17)
$22,146,282.28 =FV(B18,B19,-B17)

Buying a House
Present and Future Values of an annuity
Present Value
$140,104.96 =(B30/B31)*(1-(1+B31)^(-B32))
Periodic Cash Flow
$840.00 =0.28*36000/12
Interest/Discount Rate
0.005
Number of Periods
360
Future Value
$843,792.64 =(B30/B31)*((1+B31)^B32-1)
Present Value Excel
Future Value Excel

$140,104.96 =PV(B31,B32,-B30)
$843,792.64 =FV(B31,B32,-B30)

Future Values for Annuities

Present and Future Values of an annuity
Present Value
$25,188.82 =(B43/B44)*(1-(1+B44)^(-B45))
Periodic Cash Flow
$2,000.00
Interest/Discount Rate
0.075
Number of Periods
40
Future Value
$454,513.04 =(B43/B44)*((1+B44)^B45-1)
Present Value Excel
Future Value Excel

$25,188.82 =PV(B44,B45,-B43)
$454,513.04 =FV(B44,B45,-B43)

Annuity Due
Present Value
Periodic Cash Flow
Interest/Discount Rate
Number of Periods
annuity starts at
Future Value at
Future Value

Present and Future Values of an annuity that starts earlier/later than t=1
$27,832.65 =(B56/B57)*(1-(1+B57)^(-B58))*(1+B57)^(1-B59)
$10,000.00
0.08
3
0
3
$35,061.12 =(B56/B57)*((1+B57)^B58-1)*(1+B57)^(B60-(B58+B59-1))

Present Value Excel

Future Value Excel

$27,832.65 =IF(B59=0,PV(B57,B58,-B56,,B59+1),9.99999999999999E+35)
$35,061.12 =IF(B59=0,FV(B57,B58,-B56,,B59+1),9.99999999999999E+35)

Future Values with Monthly Compounding

Present and Future Values of an annuity
Present Value
$6,377.61 =(B72/B73)*(1-(1+B73)^(-B74))
Periodic Cash Flow
$50.00
Interest/Discount Rate
0.0075 =0.09/12
Number of Periods
420
Future Value
$147,089.22 =(B72/B73)*((1+B73)^B74-1)
Present Value Excel
Future Value Excel

$6,377.61 =PV(B73,B74,-B72)
$147,089.22 =FV(B73,B74,-B72)

Growing Annuity
Present Value
First Cash Flow
Growth Rate of Cash Flows
Interest/Discount Rate
Number of Periods
Future Value
Cash Flow
100
103
106.09
109.2727
112.550881
115.9274074
119.4052297
122.9873865
126.6770081
130.4773184

$874.76 =(B85/(B87-B86))*(1-((1+B86)/(1+B87))^(B88))
$100.00
0.03
0.05
10
$1,424.89 =(B85/(B87-B86))*((1+B87)^(B88)-(1+B86)^(B88))

Present Value Factor

0.952380952
0.907029478
0.863837599
0.822702475
0.783526166
0.746215397
0.71068133
0.676839362
0.644608916
0.613913254

Present value of cash flow (A*B)

95.23809524
93.42403628
91.64453083
89.89892072
88.18656032
86.50681632
84.85906743
83.24270424
81.65712893
80.10175504
Present value = sum of above
874.7596154

Growing Annuity: Another Example

Present Value
First Cash Flow
Growth Rate of Cash Flows
Interest/Discount Rate
Number of Periods
Future Value

$265,121.57 =(B108/(B110-B109))*(1-((1+B109)/(1+B110))^(B111))
$20,000.00
0.03
0.1
40
$11,999,205.08 =(B108/(B110-B109))*((1+B110)^(B111)-(1+B109)^(B111))

Finding periodic payment given PV

Finding the Payment
$20,000.00
$488.26 =D3*D5/(1-(1+D5)^(-D6))
0.006666667
48

$488.26 =PMT(D5,D6,-D3)

Computing Payments with APRs

$3,500.00
$172.88
0.014083333 =0.169 / 12
24 =12*2

$172.88 =PMT(D18,D19,-D16)

Amortized Loan with Fixed Payment - Example

$5,000.00
$1,509.60 =D29*D31/(1-(1+D31)^(-D32))
0.08
4

$1,509.60 =PMT(D31,D32,-D29)

Web Example
$25,000
6261.411364
0.08
5

$6,261.41

Finding the Number of Payments given PV

Example 6.6
$1,000
$20
0.015
93.11105 =-LOG(1-(G3*G5/G4))/LOG(1+G5)

93.11105 =NPER(G5,G4,-G3)

Finding the Number of Payments Another Example

$2,000
$734
0.05
2.999987 =-LOG(1-(G16*G18/G17))/LOG(1+G18)

2.999987 =NPER(G18,G17,-G16)

ier/later than t=1

B57)^(-B58))*(1+B57)^(1-B59)

57)^B58-1)*(1+B57)^(B60-(B58+B59-1))

7,B58,-B56,,B59+1),9.99999999999999E+35)
,B58,-B56,,B59+1),9.99999999999999E+35)

B73)^(-B74))

(1-((1+B86)/(1+B87))^(B88))

((1+B87)^(B88)-(1+B86)^(B88))

ash flow (A*B)

Future Value = PV*(1+r)^n

1424.891237

9))*(1-((1+B109)/(1+B110))^(B111))

9))*((1+B110)^(B111)-(1+B109)^(B111))

of Payments given PV

(G3*G5/G4))/LOG(1+G5)

of Payments Another Example

(G16*G18/G17))/LOG(1+G18)

18,G17,-G16)

Finding the Rate

Start with an arbitrary rate (e.g., 0.01); Find the PV (= $9331.767 )and use Goal Seek to find the rate th
$10,000
$9,331.767
$9,999.999
$207.58
$207.58
$207.58
0.01
0.007499393
60
60
60

0.750% =RATE(L6,L4,-L3)

oal Seek to find the rate that equates the PV to $10,000

Example 6.1
discount rate=
year
0
1
2
3

0.08 Value at time Formula

cash flow
3
7000
8817.98 =B4*(1+B$2)^(C$3-A4)
4000
4665.60 =B5*(1+B$2)^(C$3-A5)
4000
4320.00 =B6*(1+B$2)^(C$3-A6)
4000
4000.00 =B7*(1+B$2)^(C$3-A7)
Total C4:C7

PV Using Excel
FV at time

21803.58 =SUM(C4:C8)
$17,308.39 =B4+NPV(B2,B5:B7)
4 $23,547.87 =C11*(1+B2)^(B12-A4)

Chapter 6 Example 2
discount rate=
0.09 Value at time
year
cash flow
2
0
500
$594.05
1
600
$654.00

Total C18:C19
PV Using Excel
FV at time

$1,248.05
$1,050.46 =B18+NPV(B16,B19:B21)
$1,616.26 =C25*(1+B16)^(B26-A18)

Chapter 6 Example 3
discount rate=
0.08 Value at time
year
cash flow
5
0
0
$0.00
1
100
$136.05
2
0
$0.00
3
300
$349.92
Total C32:C35
PV Using Excel
FV at time

$485.97

Example 6.3
discount rate=
0.12
year
cash flow
0
0
1
200
2
400
3
600
4
800
Total H4:H8
PV Using Excel
FV at time

Chapter 6 PV Another Example

discount rate=
0.1
year
cash flow
0
0
1
1000
2
2000
3
3000
Total H18:H22
PV Using Excel
FV at time

Decisions, Decisions
discount rate=
0.15
year
cash flow
0
-100
1
40
2
75

npv of all cash flows

Total H32:H35
pv of future cash flows
Total H33:H34
$330.74 =B32+NPV(B30,B33:B35)
PV Using Excel
$485.97 =C39*(1+B30)^(B40-A32)

Value at time
0
$0.00
$178.57
$318.88
$427.07
$508.41
$1,432.93

Saving For Retirement

discount rate=
0.12 Value at time
year
cash flow
0
40
25000
$268.67
41
25000
$239.88
42
25000
$214.18
43
25000
$191.23
44
25000
$170.74
Total H4:H8
$1,084.71

$1,432.93 =G4+NPV(G2,G5:G8) Value at 40 Using Excel

$2,254.75 =H11*(1+G2)^(G12-F4) PV at time
0

other Example
Value at time
0
$0.00
$909.09
$1,652.89
$2,253.94
$4,815.93
$4,815.93 =G18+NPV(G16,G19:G22)
$7,051.00 =H25*(1+G16)^(G26-F18)

Value at time
0
-$100.00
$34.78
$56.71

-$8.51
$91.49
-$8.51 =G32+NPV(G30,G33:G35)

$100,933.73
$1,084.71