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Finance Terms
Future and Present Values
9
Finance
Undergraduate 1
11/22/2010
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Term
FV with compound interest
 Definition
K(1+r)^t
Term
FV with simple interest
 Definition
K(1+rt)
Term
discount factor
 Definition
1/(1+r)^t
Term
Present value of a perpetuity
 Definition
C/r
Term
PV of an annuity
 Definition
C(1/r-1/r(1+R)^t)
Term
Value of a bond
 Definition
B=j(1/r-1/r(1+r)^t)(1+r)^t
Term
real interest rate
 Definition
1+real int. rate=1+nominal int rate/1+inflation rate
Term
EAIR
 Definition
(1+i)^t-1
Term
APR
 Definition
i*t
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