| Question | Answer |
| Interest Rate (r) | Real Risk Free Interest Rate + Inflation Premium + Default Premium + Liquidity Premium + Maturity Premium |
| Nominal Risk-Free Interest Rate | Real risk-free interest rate + Inflation Premium |
| Future Value - Single Cash Flow in 1 year (Formula) | FV = PV(1+r)
where
PV=Present Value
FV=Future Value
r = rate of interest per period or stated annual iterest rate |
| Future Value Compounding (Annual) - Single Cash Flow in N years (Formula) | FV = PV(1+r)^N
where
PV=Present Value
FV=Future Value
r = rate of interest per period or stated annual iterest rate (as decimal)
N=Number of compounding periods (Annual) |
| Future Value Compounding other than Annual - Single Cash Flow in N years (Formula) | FV = PV(1+r/m)^mN
where
PV=Present Value
FV=Future Value
r = rate of interest per period or stated annual iterest rate (as decimal)
N=Number of compounding periods (Annual)
m=Number of compounding periods in one year |
| Future Value Continuous Compounding | FV = PV(e)^rN
where
PV=Present Value
FV=Future Value
r = rate of interest per period or stated annual iterest rate (as decimal)
N=Number of compounding periods (Annual)
m=Number of compounding periods in one year
e=2.7182818 |
| Effective Annual Rate (EAR) - only rates | EAR = (1+r/m)^m - 1
where
r = rate of interest per period or stated annual iterest rate (as decimal)
m=Number of compounding periods in one year |
| Effective Annual Rate (EAR) - rate, PV & FV | EAR = (FV / PV)^1/N - 1
where
PV=Present Value
FV=Future Value
r = rate of interest per period or stated annual iterest rate (as decimal)
N=Number of years |
| Effective Interest Rate (EIR) - rate, PV & FV - Other than annual compounding frequency (i.e. monthly, quarterly, & semiannually) | r = [(FV / PV)^1/mN - 1] m
where
PV=Present Value
FV=Future Value
r = rate of interest per period or stated annual iterest rate (as decimal)
N=Number of years
m=Number of compounding periods in one year |
