HOFFMAN Time Value of Money (TVOM) formulas
D-1 Future Value Interest Factor FVIFk,n = (1 + k)n
What will $1000 deposited be worth in 3 years if you can earn 5% annually?
FV = 1000(1 + .05)3 = 1000(1.157625) = $1,157.63
D-2 Future Value Interest Factor of an Annuity FVIFAk,n = (1 + k)n –1
. k
What will $1000 deposited annually be worth in 3 years if you can earn 5%
annually?
FVA = 1000[(1 + .05)3 -1]/.05 = 1000(3.1525) = $ 3,152.50
D-3 Present Value Interest Factor PVIFk,n = 1
. (1 + k)n
What is $1000 to be received at the end of 3 years worth to you today
assuming an interest rate of 5%?
PV = 1000[ 1/(1 + .05)3 = 1000(.8638376) = $863.84
D-4 Present Value Interest Factor of an Annuity PVIFAk,n = (1 + k)n -1
. k(1 + k)n
What is $1000 to be received annually for the next 3 years worth to you
today assuming an interest rate of 5%?
PVA = 1000 x (1 + .05)3 – 1 = 1000 x .157625
. .05(1 + .05)3 .005788125
. = 1000(2.723248) = $2,723.25
