Interest Rate Equations

By

FV = PV*g

Where

FV is the future value

PV is the present value

g is the growth factor or interest rate factor

the value of g changes depending on the type of interest: whether it’s simple, compounding, or continuously compounding

Simple -> g = (1 + r)^n

Compounding -> g = (1 + r/m)^(m*n)

Continuously compounding -> g = e^(r*n) = exp(r*n)

Where

r is the interest rate

m is the periodicity (Annual -> m = 1, semi-annual -> m = 2, quarterly -> m = 4 etc. It is the number of times per year the annual interest rate gets applied).

n is the number of terms. I.e. n = 5 to compute the FV five years from now (assuming r is annual)

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