Annuities and Loans

FV: future value (amount) PV: present value (amount) PMT: periodic payment r: rate (as a decimal) m: number of compounding periods i: interest rate per period (i = r/m) n: number of payments (n = mt) Future Value of an Ordinary Annuity

(1 + i)n 1 FV = PMT i
Number of Payments, n

FV ln i + 1 PMT n= ln(1 + i)
Note: ln is the natural logarithmic function Periodic Payment, PMT, of an Ordinary Annuity (Given a Future Value)

i PMT = FV n (1 + i) 1

Present Value of an Ordinary Annuity

PV = PMT

1 (1 + i ) i

Periodic Payment, PMT, of an Ordinary Annuity (For Amortization)

i PMT = PV n 1 (1 + i)