TIME VALUE OF MONEY

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A
SPREADSHEET FUNCTIONS

Given the number of periods (or number of payments), any two of the following determine
the third: present value, cash flow, discount rate. Be careful about the signs!
1. The present value is computed as PV(interest rate, # of periods, cash flow).
Discount rate
Number of periods
Cash flow
Present value

10%
5
1,000
(3,791)

2. The present value can also be computed as NPV(interest rate, series of cash flows).
Year
Cash flow
PV of cash flows

1,000

1,000

1,000

1,000

1,000

3,791

3. The cash flow is computed as PMT(discount rate, # of periods, present value).

Discount rate
Number of periods
Present value
Cash flow

10%
5
3791
(1,000)

4. The discount rate is computed as IRR(series of present value and cash flows).
Year
Cash flow
Internal rate of return

(3,791)
10%

1,000

1,000

1,000

1,000

1,000

Page 1

1 A FUTURE VALUE OF LUMP SUMP

Inputs
Rate
# of Periods
Pmt
Present Value
Type
Outputs
Future Value
Formula

8%
5
0
-1000

$1,469.33

5%
5
0
-1000

$1,276.28

=FV(rate,nper,0,pv)

11%
5
0
-1000

$1,685.06

8%
10
0
-1000

$2,158.92

(using 0 for pmt)

2 A FUTURE VALUE OF ANNUITY ORDINARY

Inputs
Payment
# of Periods
Interest Rate

1000
5
7%

Outputs
Future Value

($5,750.74)

Formula

$5,750.74

=FV(rate,nper,pmt)

(no pv reqd)

3 A FUTURE VALUE OF ANNUITY DUE

Inputs
Payment
# of Periods
Interest Rate
Present Value
Type
Outputs
Future Value
Formula

1000
5
7%
0 DUMMY
1

($6,153.29)

-$6,153.29

$6,153.29

=FV(rate,nper,pmt,0,type)

(using 0 for pv)

4 A FUTURE VALUE OF MIXED STREAM

Inputs
Payment
Interest Rate

400
9%

800

500

400

300

# of Periods
Outputs
Net Present Value
Future Value
Formula
Formula

$1,904.76 (cannot use PV formulae, it does not accommodate mixed cash flow streams)
($2,930.71)
=NPV(rate,value1,value2,..)
=FV(rate,nper,0,pv)
(using 0 for pmt)

1 B PRESENT VALUE OF LUMP SUMP

Inputs
Rate
# of Periods
Pmt
Future Value
Type
Outputs
Present Value
Formula

8%
5

8%
5

11%
5

-1000 ($1,469.33)

-1000

$680.58

$1,000.00

=PV(rate,nper,0,fv)

$593.45
(using 0 for pmt)

2 B PRESENT VALUE OF ANNUITY ORDINARY

Inputs
Payment
# of Periods
Interest Rate

Outputs
Present Value
Formula

7000
5
8%

1000
5
7%

($27,949)

($4,100)

=PV(rate,nper,0,fv)

$4,100.20

(using 0 for pmt)

3 B PRESENT VALUE OF ANNUITY DUE

Inputs
Payment
# of Periods
Interest Rate
Present Value
Type
Outputs
Future Value

7000
5
8%

1000
5
7%
0
1

($30,185)

-30184.89

($4,387.21)

4 B PRESENT VALUE OF MIXED STREAM

Inputs
Payment
Interest Rate

4000
9%

8000

5000

cash flow streams)

Outputs
Net Present Value

Formula

$19,047.58

(cannot use PV formulae, it does not accommodate mixed ca

=NPV(rate,value1,value2,..)

8%
8
-1700

$918.46

$4,387.21

4000

3000

, it does not accommodate mixed cash flow streams)

Annuity Calculations
Inputs
Payment
Discount Rate / Period
Number of Periods
Present Value
Payment
Payment Using PMT Function
Discount Rate / Period
Discount Rate Using Rate Function
Number of Periods
Num of Periods Using the NPER Function

Find the future value

Find the present value
Payment of an annuity
Number of periods
Yield of an annuity
Present value of unequal cash flows
Find the yield of unequal cash flows
Raise e to a power

80.00
6%
5
$336.99

$80.00

6%

In solving for the Payment, use the formula and PMT function

In solving for the Discount Rate / Period, use the RATE function

In solving for the Number of Periods, use the NPER function

FV(RATE, NPER, PMT, PV,TYPE)

PV(RATE, NPER, PMT, FV,TYPE)
PMT(RATE, NPER, PV, FV,TYPE)
NPER(RATE, PMT, PV, FV,TYPE)
RATE(NPER, PMT, PV, FV,TYPE,GUESS)
NPV(RATE,VALUE1,VALUE2,)
IRR(VALUES,GUESS)
EXP(NUMBER)

PMT function

RATE function

ER function

Rate

Year
10%

Simple Annual Interest

Compounded Annually

100
110
120
130
140
150
160
170
180
190
200
210
220
230
240
250
260
270
280
290
300

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

100
110.0
121.0
133.1
146.4
161.1
177.2
194.9
214.4
235.8
259.4
285.3
313.8
345.2
379.7
417.7
459.5
505.4
556.0
611.6
672.7

800
700
600
500
400
300
200
100
0
Year

Simple Annual Interest

10

Compounded Annually

11

12

Com

Compounded Monthly

Compounded
Continuously

100
$110.47
$122.04
$134.82
$148.94
$164.53
$181.76
$200.79
$221.82
$245.04
$270.70
$299.05
$330.36
$364.96
$403.17
$445.39
$492.03
$543.55
$600.47
$663.35
$732.81

10

ded Annually

11

12

13

14

Compounded Monthly

100

15

16

17

18

19