MATH 325 Lecture Notes - Lecture 2: Toyota Electronic Modulated Suspension, United States Treasury Security, Nominal Interest Rate
8 Sep 2016
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Note: the phrases amount of interest and amount of discount are used interchangeably in situations involving rates of discount, when we have compound interest, the effective rate of interest is constant. Compound rate of discount present value factor. Assuming an annual compound rate of discount d: pv of a payment of to be made in n years is , av after 1 year of a deposit of at t = 0 : How much should an investor deposit today to have at the end of 15 years if the annual rate of discount is 4%. Two rates of interest or discount are said to be equivalent if a given amount of principle invested for the same length of time at each of the rates, produces the same accumulated value. The amount of discount earned in each period is constant. Simple discount is generally used for tems less than 1 year.
