Topic: Financial Mathematics

Present Value of a Perpetuity

A perpetuity is a type of annuity that pays equal cash flows that occur periodically such as monthly, quarterly or annually for an infinite period of time. The present value of an annuity is calculated using the following formula: PV = A/r Where, A is the annuity...

Present Value of a Single Cash Flow

Present value of a single cash flow refers to how much a single cash flow in the future will be worth today. The present value is calculated by discounting the future cash flow for the given time period at a specified discount rate. The formula for calculating future...

Future Value of a Single Cash Flow

Future value of a single cash flow refers to how much a single cash flow today would grow to over a period of time if put in an investment that pays compound interest. The formula for calculating future value is: Example Calculate the future value (FV) of an...

Interest Rate Equation

The required interest rate that an investor earns from an investment is made up of various components. The general interest rate equation is expressed below: The nominal risk-free rate itself is expressed as the sum of real-risk free rate and inflation premium. It is...

Types of Interest Rates

Interest rates are how we measure the time value of money. While making an investment, an investor will need to know the interest rate that the investment will earn. The interest rates can be interpreted in many ways. Required Rate of Return Required rate of return is...

Page 1 of 41234