- Amount of simple interest
- interest/interest rate
- principal/present value
- simple interest formula
- Future value
- Interest for part of a year
- exact interest
- ordinary interest
- time ordinary interest
- future value formula (simple interest)
- Compounding interest
- compound interest
- compounding annual
- other compounding periods
- future value formula (compound interest)
- contrast simple and compound interest
- interest variables
- Continuous compounding
- the number e
- future value formula (continuous compounding)
- Present value
11.1 Essential Ideas
Variables used in this chapter:
A = FUTURE VALUE: This is the principal plus interest.
P = PRESENT VALUE : This is the same as the principal.
r = INTEREST RATE: This is the annual interest rate.
t = TIME: This is the time in years.
n = NUMBER OF COMPOUNDING PERIODS EACH YEAR
N = nt: This is the number of compounding periods.
i = r/n: This is the rate per period
Simple interest formula: I = Prt
Future value formula (simple): A = P(1 + rt)
Future value formula (compound): A = P(1 +rt)N
Future value formula (simple): A = Pert
For present value solve for P.