Future Value

If we have an amount of money that we are investing today what would this be worth in the future.
The amount of money that we receive in the future is called the future value.


Simple Interest

Simple interest is when interest is not re-invested.
This is an example of an Arithmetic Sequence where a series of numbers differs by a fixed amount.


Compounded Interest

Compounded interest is when interest is immediately re-invested.
This is an example of a Geometric Sequence where a series of numbers are multipled by a fixed amount (or common ratio).


Discount Factor

This is a decimal number that when multiplied by a future value will give the present value.


Sinking Fund

This is an example of a Geometric Sequence where a series of numbers are multiplied by a fixed amount (or common ratio).


Important

On short-term instruments (less than 1 year), interest is usually simple, not compounded.


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