Interest rate calculations, Other Engineering

Interest Rate Calculations

In considering the time value of money, it is convenient to represent mathematically the relationship between the current or present value of a single sum, which we will represent as P, and its future value (F) in n years.

F = P + In

where In is the increase in the value of P over n years, which is a function of an annual interest rate (i).
The are two approaches for computing In. The first approach known as simple interest rate considers In to be a linear function of time, which is given by,

In = Pin
and
Fn = P(1 + in)

The second approach known as compound interest rate, considers that at the end of each interest period the accumulated amount of money is now the amount of principal at the end previous period plus the interest accumulated over that period P(l + i); therefore, for the subsequent period the accumulated amount of money will be P(P + i)i. Now, using the same procedure we can fill Table 2.1 for the subsequent periods.

Table Derivation of equation 1

1732_Intrest for next period.png

Thus, we can derive the formula for the future amount F, in terms of P, i, and n given by,

F =P(l+i)n

Posted Date: 3/15/2013 5:32:29 AM | Location : United States







Related Discussions:- Interest rate calculations, Assignment Help, Ask Question on Interest rate calculations, Get Answer, Expert's Help, Interest rate calculations Discussions

Write discussion on Interest rate calculations
Your posts are moderated
Related Questions
Design a dc-coupled one op amp circuit that will amplify the 100uV EOG to have the maximal gain possible without exceeding the ttypical guarenteed linear outpt range.

Testing After Install After installation of a propeller, the engine must be ground run in order to check the propeller for correct function and operation.  Aircraft propeller in

Shelf List Filing   Shelf list reflects the arrangement of documents in the library. That is to say, the classificatory arrangement of the documents in a library can be seen th

all about pepsi company symbol PEP 1. What is the name of the company? What is the industry sector? 2. What are the operating risks of the company? 3. What is the financial risk

can you answer some problem from physical chemistry with a detailed approach why and how one should choose the steps in solving them.These are just random question that I have no c

Expertsmind.com brings you unique solution in electrical engineering -          Laws of Motion -          Speed is how much distance will be covered in a certain time.


explain compensated semiconductors


Providing fire resistant: If the building does not provide everyone with alternative exit routes then it may be acceptable for people to pass the fire if they are separated f