NOTATION

g = Constant growth rate i = Interest rate per conversion period (periodic

PMT = Periodic payment of the annuity
n = Number of payments during the term of an
annuity
FV = Accumulated value or future value of an
annuity
𝐹𝑉𝐷𝑢𝑒 = Future value of an annuity due
𝐹𝑉𝐷𝑒𝑓 = Future value of a deferred annuity
𝑃𝑉𝑃𝑒𝑟𝑝 = Present value of an ordinary perpetuity
interest rate)
j = Nominal interest rate
t = Time period
PV = Discounted value or present value of an
annuity
𝑃𝑉𝐷𝑢𝑒 = Present value of an annuity due
𝑃𝑉𝐷𝑒𝑓 = Present value of a deferred annuity
𝑃𝑉𝑃𝑒𝑟𝑝 𝐷𝑢𝑒 = Present value of a perpetuity due

FORMULAS

Present Value of an Ordinary Perpetuity | 11.2(a)

𝑃𝑀𝑇
𝑃𝑉𝑃𝑒𝑟𝑝 =
𝑖

Present Value of a Perpetuity Due | 11.2(b)

𝑃𝑀𝑇 𝑃𝑀𝑇
𝑃𝑉𝑃𝑒𝑟𝑝 𝐷𝑢𝑒 = (1 + 𝑖) 𝑜𝑟 𝑃𝑉𝑃𝑒𝑟𝑝 𝐷𝑢𝑒 = + 𝑃𝑀𝑇
𝑖 𝑖

Future Value of an Ordinary Simple Constant-Growth Annuity | 11.3(a)

(1 + 𝑖)𝑛 − (1 + 𝑔)𝑛
𝐹𝑉 = 𝑃𝑀𝑇 [ ]
(𝑖 − 𝑔)

Present Value of an Ordinary Simple Constant-Growth Annuity | 11.3(b)

1 − (1 + 𝑔)𝑛 (1 + 𝑖)−𝑛
𝑃𝑉 = 𝑃𝑀𝑇 [ ]
(𝑖 − 𝑔)

Sum of Constant-Growth Payments | 11.3(c)

(1 + 𝑔)𝑛 − 1
𝑆𝑢𝑚 𝑜𝑓 𝐶𝑜𝑛𝑠𝑡𝑎𝑛𝑡- 𝐺𝑟𝑜𝑤𝑡ℎ 𝑃𝑎𝑦𝑚𝑒𝑛𝑡𝑠 = 𝑃𝑀𝑇 [ ]
𝑔