Finance: Future value and present value
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Topic Notes
In this section, we will revisit the connection between mathematics and finance, but from a different perspective. We will see how a slight variation of the Compound interest formula can help us understand some of the core concepts in Finance – Future value and Present value.
future value and present value: FV=PV(1+nr)nt
FV: Future Value
PV: Present Value
r : Annual interest rate
t: total time given in years
n : number of times compounded in a year, if
FV: Future Value
PV: Present Value
r : Annual interest rate
t: total time given in years
n : number of times compounded in a year, if
|
Compound daily: |
n = 365 |
|
Compound monthly: |
n = 12 |
|
Compound quarterly: |
n = 4 |
|
Compound semi-annually: |
n = 2 |
|
Compound annually: |
n = 1 |
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