BIOL 1500 Study Guide - Interest
2 Sep 2014
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Appendix 1b the time value of money: future value and present value. Three amounts are used to calculate the time value of money for savings in the form of interest earned: Length of time the money is on deposit. Simple interest interest computed on the principle, excluding previous earned interest. Interest = amount in savings (p) x annual interest rate (r) x time period (t) Compound interest- process that calculates interest based on previously earned interest. Each time interest is added to principal, the next interest amount is computed on the new balance. *total amount"s greater for compound than simple interest (earns interest on principle and accumulated interest) Future value (fv)- amount current savings will increase based on certain interest rate and certain time period (consists of original amount plus compound interest) Future value = original amount in savings + amount of interest earned (multiply principal by table value)
