Financial Formulas, section Time value of money

The concept of the time value of money states that the value of a certain sum of money changes depending on when it is received. The formulas laid out in this section will explain how to calculate this change over time.

Formulas in this section

Formulas for interest calculations

Annual compound interest rate equivalent to a periodical compound interest rate

Calculation of a real interest rate (Fisher equation)

Conversion of a nominal interest rate into an effective interest rate

Forward interest rate

Periodical compound interest rate equivalent to an annual compound interest rate

Proportional periodic interest rate equivalent to a simple annual interest rate

Simple annual interest rate equivalent to a proportional periodic interest rate

Simple interest (annual interest calculation)

Simple interest with sub-annual interest periods

Yield (annual interest calculation)

Zero-coupon rate from the discount factor

Formulas for the calculation of present and future values

Cash flows required for the constitution of a capital

Discount factor calculation based on periodic interest rate and number of periods

Discount factor calculation based on present and future values

Future value of a series of n cash flows placed at the end of each interest period for n periods

Future value of a series of n cash flows placed at the start of each interest period for n periods

Future value of a single cash flow (annual compounding of interest)

Future value of a single cash flow (sub-annual compounding of interest)

Interest rate required for a capital to reach a given future value when placed for a duration of N years

Present value of a series of equal annual cash flows

Present value of a series of unequal annual cash flows

Present value of a single cash flow (annual compounding of interest)

Present value of a single cash flow (sub-annual compounding of interest)