The Difference is Negligible

# The Difference is Negligible - The Difference is Negligible...

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The Difference is Negligible 1 k = annual rate i = daily periodic rate n = number of days FV FV 1 + ( kn ) [1 + k ] n FV FV 1 + (n х k/ 365 ) [1 + k / 365 ] n PV = \$200,000 PV = \$200,000 1 + (30 х 0.10 / 365 ) [1 + 0.10 / 365 ] 30 PV = \$198,369.57 PV = \$198,363.12 Simple Interest PV = Compound Interest PV = PV = PV =

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Two Ways to Compute S/I 2 If the annual rate ( k ) has already been converted to a periodic rate ( i ), the number of periods ( n ) can be substituted directly. BE CAREFUL WITH ROUNDING!! FV FV 1 + ( kn ) 1 + ( i х n ) FV 1 + (n х k/ 365 ) PV = \$200,000 PV = \$200,000 1 + (30 х 0.10 / 365 ) 1 + (30 х 0.00027397 ) PV = \$198,369.57 PV = \$198,369.56 Simple Interest w/ ANNUAL Rate PV = Simple Interest w/ DAILY Rate PV = PV = k = annual rate i = daily periodic rate n = number of days
3 If this formula is true for a single cash flow: This is the expanded formula for a series of cash flows: k = annual rate i = daily periodic rate n = number of

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The Difference is Negligible - The Difference is Negligible...

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