Time Value of Money Concepts
Copyright © 2002-2008 by David R. Frick & Co., CPA
Topics
Home Page
Present Value of Single Sum
Future Value of Single Sum
Present Value of Annuity
Future Value of Annuity
Annuity Due
Miracle of Compounding
Continuous Compounding
Interest Rate
Cash Flow Diagram
Definitions and Assumptions
Loan Amortization
Formula Quick Reference
Solved Problems
Search for example problems with detailed explanations using the following resources:
  • Application - specify a particular use or application such as "Find PV single sum" or "mortgage calculations."
  • Keyword - search from a list of key words such as "payment" or "Excel RATE function."
  • **NEW** Compound Keyword Search - advanced search using 2 keywords with AND, OR & NOT."
  • Formula - review a list of TVOM formulas with links to solved problems.
  • List - sort and/or filter the master list of all solved problems.
    • Problems & Errors
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    • Home Page for Time Value of Money Concepts

    Welcome.

    This is the home page for my website on Time Value of Money (TVOM) concepts. This site provides reference material for understanding and applying TVOM theory. Actuaries typically refer to this material as part of the "general theory of interest rates". However, the perspective here is purely financial with an emphasis on the fundamental building blocks of quantitative investment analysis.

    The material is organized into two sections: 1) practical examples of the application of TVOM concepts (i.e., solved problems); and 2) outlines of key concepts. Think of this organization as a "theory" and "practice" approach.

    Solved Problems

  • TVOM Formulas - A quick reference of mathematical formulas used in TVOM computations with links to solved problems that illustrate the application of the formula.

  • TVOM Applications - A list of TVOM applications including specifics such as "Find i for an annuity" as well as general such as "Mortgages" or "T-Bills and Bonds." Links are provided to related solved problems.

  • Keyword Index - An index of keywords with links to related solved problems.

  • TVOM Problems - A comprehensive list of all of the solved TVOM problems with hints and links to answers.

    • Outlines of Key Concepts

  • The Four Basic TVOM Formulas

  • Present Value of Single Sum - An overview of basic PV calculations with respect to a single sum.

  • Future Value of Single Sum - An overview of basic FV calculations with respect to a single sum.

  • Present Value of an Annuity - An overview of basic PV calculations with respect to an annuity, a series of periodic payments.

  • Future Value of an Annuity - An overview of basic FV calculations with respect to an annuity, a series of periodic payments.

  • Annuity Due - Timing of payments: beginning or end of the period.

  • The Miracle of Compounding - The impact of frequency and term on the effect of compounding.

  • Continuous Compounding - - Derivation of the continuous compoundinng formula.

  • Interest Rates - Factors effecting the choice of interest rate.

  • Cash Flow Diagram - How to construct a cash flow diagram to assist with solving TVOM problems.

  • Assumptions and Definitions - List of assumptions underlying TVOM calculations and basic TVOM definitions.

  • Loan Amortization - An example of amortizing a loan using an Excel spreadsheet

    • Copyright © 2002-2008 by David R. Frick & Co., CPA