उत्सव, विकास अनि ब्लग जिन्दगी

Compounding and discounting

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The process of calculating future values = compounding, ie the sum of beginning amount and the interest earned.

The process of finding out the present value = discounting ie the inverse of compounding.

Basically for a single cash flow:

F = P [F/P, i%, N]

F = P (1+i)N

!!! The following are the cases for discrete compounding and discrete cash flow.

Case 1. Finding F when A is given

F = A [F/A, i%, N]

 

The quantity inside the square brackets = Uniform series compound factor

 

Case 2. Finding P when A is given

P = A [P/A, i%, N]

 

The quantity inside the square brackets = Uniform series present worth factor

 

Case 3. Finding A when given F

A = F [A/F, i%, N]

 

The quantity inside the square brackets = Sinking fund factor

 

Case 4. Finding A when given P

A = P [A/P, i%, N]

 

The quantity inside the square brackets = Capital recovery factor

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