BUSI 1915U Lecture Notes - Lecture 11: Nominal Interest Rate, Promissory Note, Credit Union
Document Summary
Compound interest ~ future value and present value. Interest for a specified time period is added to the original principal. The sum of the principal and interest becomes the new principal for the next time period. The amount of compound interest for the first period is the same as for simple interest but is greater for the following periods. The final amount of the loan or the investment at the end of the last period. Nominal or annual rate j (stated annual rate of interest) Periodic rate per period i equals: nominal rate / # of compounding per year i = j/m. Total number of periods n equals: (#of years) * (# of compounding per year) n = # of years * m. Is the maturity value, or the final amount of the loan or the investment at the end of the last period. Present value is the value of a loan or investment today!
