Download presentation
Presentation is loading. Please wait.
Published byEmory Terry Modified over 8 years ago
1
Chapter 10: Compound Interest, Future Value, and Present Value Find the future value and compound interest by compounding manually. Find the future value and compound interest by using a $1.00 future value table. Find the future value and compound interest using a formula (optional). Find the effective interest rate. Find the interest compounded daily using a table.
2
Key Terms Interest period: the amount of time which interest is calculated and added to the principal. Compound interest: the total interest that accumulated after more than one interest period. Future value, maturity value, compound amount: the accumulated principal and interest after one or more interest periods. Period interest rate: the rate for calculating interest for one interest period-the annual interest rate is divided by the number of periods per year.
3
Find the Future Value and Compound Interest by Compounding Manually Dividing the annual interest rate by the annual number of interest periods gives us the period interest rate. 12% annual interest rate divided by 2 interest periods yields a period interest rate of 6%, for example. Using I = P x R x T, we can calculate the interest per period, simplifying the formula to I = P x R, since T is one period.
4
Find the period interest rate Period interest rate = Annual interest rate Number of interest periods per year
Similar presentations
© 2025 SlidePlayer.com. Inc.
All rights reserved.