This preview shows page 1. Sign up to view the full content.
Unformatted text preview: d summarized by Vera Klimkovsky. Mathematics of Finance Compound Interest Compounding periods
Interest may be compounded more than once a year: Semiannually (twice per year)
Quarterly (four periods per year)
Monthly (twelve periods)
Daily (usually 365 periods per year) Compound Amount Formula:
Note:
This formula is used when interest
is compounded more than once a
year. is a number of compounding
periods. Mathematics: Applications for Business Example:
A developer needs $80,000 to buy land. He is able to borrow the money
at 10% per year compounded quarterly. How much will the interest
amount to if he pays off the loan in 5 years?
Solution: compounding periods per year. Based on custom edition “Math: Applications for Business.”
Prepared and summarized by Vera Klimkovsky. Mathematics of Finance Compound Interest Then,
and Mathematics: Applications for Business ( ) Continuous Compounding
Formula:
Note:
This formula is used when interest
is compounded continuously (i.e. at
every given moment in ti...
View
Full
Document
This note was uploaded on 10/19/2011 for the course MATH 110 taught by Professor Staff during the Spring '11 term at S.F. State.
 Spring '11
 Staff
 Math, Calculus

Click to edit the document details