Compounding factor

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Revision as of 06:32, 3 August 2013 by imported>Doug Williamson (Spacing)
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(CF).

A number greater than one which we multiply a present value by, to work out its Future Value as: FV = CF x present value.

The periodic Compounding Factor is calculated from the periodic yield as: CF = (1 + periodic yield).

For example when the annual effective yield (r) = 6% and the number of years in the total period (n) = 2, then: Compounding Factor = (1+r)n = 1.062 = 1.1236

See also