Lecture 2: FV, PV, Compounding
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5 Terms
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What is the future value formula?
The total amount due at the end of the investment
FV = PV (1+r)
2
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What is the present value formula?
The amount a borrower would need to set aside today to meet the promised payment
PV = FV / (1+r)
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What is compounding/compound interest?
The interest earned is higher each year because you earn interest on interest
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How do you find how long the wait time of an investment is?
Use algebra and then use log!
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How do you find the interest rate for an investment?
Use algebra and then use the square root / inverse power
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