Surprisingly Effective Ways To Property Valuation

So we have two years of simple interest interest on principle in addition is simple interest the return now includes another item squared interest earned on previous interest interest on interest interest on interest is called compound interest so when we invest at compound interest the periods return consists of simple interest and compound interest compounding is earning interest on interest now let’s reinvest the entire sum we have at your two for another year and earn a return over year three.

we can see the emerging pattern and generalize the equation to obtain the standard equation for future value the future value at time t is equal to the cash invested time this is also the present value we multiply the present value by future value factor that future value factor consists of the interest rate per period and the total number of periods over which the cash Property Valuation Melbourne is invested by we mean compounding period a compounding period is the interval timer which compounding occurs with yearly compounding compounding occurs once year at the end of the year in this lecture will initially be working with yearly compounding but compounding.

may occur more frequently than just once semiyearly annual compounding compound interest twice a year every six months quarterly compounding four times a year every third month compounding they also be monthly or daily compounding can even be continuous look at other compounding periods later in the lecture let’s put some numbers in our example and invest a hundred dollars an annual compound interest rate of ten percent compounding is earning interest on previous interest and compounding is process by which future values are created in this graph we’ve invested.


Leave a Reply

Your email address will not be published. Required fields are marked *

Scroll To Top