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Finance: Future value and present value - Exponential Functions

Finance: Future value and present value

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.

Lessons

Notes:
future value and present value: FV=PV(1+rn)nt { FV = PV (1+\frac{r}{n})^{nt}}

FV {FV} : Future Value
PV {PV} : Present Value
r {r} : Annual interest rate
t {t} : total time given in years
n {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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Finance: Future value and present value

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