Compounding factor: Difference between revisions
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(CF). A number greater than one which we multiply a present value by, to work out its [[Future Value]] as: | (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. | FV = CF x present value. | ||
Revision as of 06:32, 3 August 2013
(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
