Excel L2.xlsx - Fig 5.2 Future Value of $100 at 10 Interest earned Year 1 2 3 4 5 Total i PV Value at beginning of year Simple interest $100.00 $10.00

Excel L2.xlsx - Fig 5.2 Future Value of $100 at 10 Interest...

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Fig. 5.2 Future Value of $100 at 10% Interest earned Year Simple interest 1 $100.00 $10.00 $0.00 $10.00 $110.00 2 $110.00 $10.00 $1.00 $11.00 $121.00 3 $121.00 $10.00 $2.10 $12.10 $133.10 4 $133.10 $10.00 $3.31 $13.31 $146.41 5 $146.41 $10.00 $4.64 $14.64 $161.05 Total $50.00 $11.05 $61.05 i 10.00% PV $100.00 Value at beginning of year Interest on interest Total (compound) interest Value at end of year
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Simple Interest vs Compound Interest.What is the difference?
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Demo Prob 5.1 Compound Interest Simple Interest FV = PV + (P * i * n) PV $1,000 PV $1,000 i 10.00% i 10.00% m 1 m 1 n 100 n 100 FV ### FV $11,000.00 nterest Earned ### nterest Earned$10,000.00 Difference ### FV = PV ( 1 + i / m ) (n * m) FV with Compounding of Future Value. How w calculate the amount o interest?
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once per year. The components would you of interest-on-
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PV $10,000 $10,000 i 5% 5% m 4 365 n 5 5 FV ### ### Difference $19.66 Demo Prob 5.2 (Varying m ) FV = PV * (1 + i / m) n * m FV with compounding more than once per year. Vary m.
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Decision-Making Example 5.1 Formula Bank A B C D PV $10,000 $10,000 $10,000 $10,000 i 7.00% 7.00% 6.80% 6.85% m 1 4 12 365 n 5 5 5 5 FV ### ### ### ### Difference $122.26 $10.48 $58.67 Decision-Making Example 5.1 Formula Bank A B C D PV $10,000 $10,000 $10,000 $10,000 i 7.00% ### ### ### m 1 4 12 365 n 5 5 5 5 FV ### ### ### ### Difference $0.00 $0.00 $0.00 FV = PV * ( 1 + i / m ) (n * m) FV = PV * ( 1 + i / m ) (n * m) Now…w alternati frequen 7%p.a a
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