COMMERCE 2FA3 Lecture Notes - Lecture 5: Interest Rate Future, Interest, Investment
14 Oct 2018
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Document Summary
Future value refers to the amount of money to which an investment would grow over some length of time at some given interest rate future value is the cash value of an investment sometime in the future. The process of leaving your money and any accumulated interest in an investment for more than one period, thereby reinvesting the interest, is called compouding earning interest on interest. Simple interest the interest is not reinvested, so interest is earned each period only on the original principal. Fv = x (1 + r) ^t. 1 x (1 + 0. 10) ^5 = 4% per year, to invest, how much will you have at the end of two years. x (1 + 0. 04) ^2 = 1. 0816 x 1. 0816 = 351. 52. in simple interest 325 x 0. 04 = 13 x 2 = 26. sh. 52 in compounded interest 26. 52 - 26 = 0. 52.
