Studied by 1 person
all things compound interest
future value for compound interest
Future value in finance is how much an investment will be worth in the future based on the amount you invest now and the interest or growth it earns over time. It shows the final value of your investment after it grows at a certain rate.
Future value over a single period
FV = PV(1 + i)
elaborate on the equation
FV = future value
PV = present value
i = effective annual interest rate (EAR) percentage
n = time
Future value over multiple periods
FV = PV(1 + i)^n
present value (1 + interest rate) to the power of time
What is present value compounding interest?
Present value is how much a future amount of money is worth today, based on a certain interest rate and time. Since money today can be invested and grow, it's considered more valuable than the same amount of money in the future.
Present value over a single period
PV = FV / (1+i)
Present value over multiple periods
PV = FV / (1+i)^n
number of periods
there is 2 equations that you can use Ln formula or rule of 72
rule of 72 can only be used if the FV is double the PV
what is the Ln formula?
(FV / PV) / (1 + i)
