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Unformatted text preview: 1.1 The value in each cell of the table is called the future value interest factor.
This factor is the multiplier used to calculate, at a specified interest rate, the
future value of a present amount as of a given time. The future value interest factor for an initial principal of $1 compounded at i percent for n periods is referred
to as FVIFi,n.
Future value interest factor FVIFi,n (1 i)n (4.5) By finding the intersection of the annual interest rate, i, and the appropriate
periods, n, you will find the future value interest factor that is relevant to a particular problem.2 Using FVIFi,n as the appropriate factor, we can rewrite the general equation for future value (Equation 4.4) as follows:
FVn PV (FVIFi,n) (4.6) This expression indicates that to find the future value at the end of period n of an
initial deposit, we have merely to multiply the initial deposit, PV, by the appropriate future value interest factor.3
1. This table is commonly referred to as a “compound interest table” or a “table of the future value of one dollar.”
As long as you understand the source of the table val...
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