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Appendix 1B.docx

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BIOL 1500
Marie Therese Rush

Appendix 1BThe Time Value of Money Future Value and Present Value Computations Interest Calculationsthree amounts are used to calculate the time value of money for savings in the form of interest earnedthe amount of the savings principalannual interest ratelength of time the money is on deposittwo methods to calculate interestsimple interestinterest computed on the principle excluding previous earned interestInterestAmount in Savings P x Annual Interest Rate R x Time Period T IP x R x Tcompound interest process that calculates interest based on previously earned interesteach time interest is added to principal the next interest amount is computed on the new balancetotal amounts greater for compound than simple interest earns interest on principle and accumulated interestFuture Value of Single AmountFuture value FV amount current savings will increase based on certain interest rate and certain time period consists of original amount plus compound interestFuture ValueOriginal Amount in SavingsAmount of Interest Earned multiply principal by table valueFuture value year 1100100 x 06 x 1 year106Future value year 2106106 x 06 x 1 year11236Intraperiod compounding compounding frequency is more tha
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