1.

LUMP SUM
 Future Value

S = P* ( 1 + i )N

P = present value
S = future value (maturity value)

i = interest rate in percent per period

N = number of periods

1. ANNUITY
 FUTURE VALUE

 S = R * [ ( ( 1 + i )N - 1 ) / i ]

S = future value (maturity value)

R = payment per period

i = adjusted interest rate in percent per period

N = number of periods

 PRESENT VALUE

A = R * [ 1 - ( 1 + i )-N / i ]

A= Present value
R = loan / mortgage amount

i = interest rate in percent per period

N = number of periods

Lump sum, is like you put money in bank account and you just keep it there for long time so you get
an interest ( You get more money for just keeping it). Lump sum, is when you put that money only
once and if you see S = stands for future because you will get the result in future!

Annuity, is equal series of payment in equal time. The value of a group of payments at a

specified date in the future. Like you have to pay for a house every month an exact amount of time !

The difference between PRESENT VALUE ANNUITY and FUTURE VALUE : is present value, decide to
buy something now ! you see the 2nd problem in homework – the page she gave us today- about the
car ?....That s present annuity ! because they intend to buy it now !!!! not later !

Look at this website , http://www.getobjects.com/Components/Finance/TVM/pva.html