CLBILS and Compounding factor: Difference between pages
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(CF). | |||
A number greater than one which we multiply a present value by, to work out its [[Future Value]] (FV) as: | |||
FV = CF x present value. | |||
[[ | The periodic Compounding Factor is calculated from the periodic yield as: | ||
[[ | |||
[[ | CF = ( 1 + periodic yield ). | ||
'''Example''' | |||
Annual effective yield (r) = 6%. | |||
Number of years in the total period (n) = 2. | |||
Then: | |||
Compounding Factor = ( 1 + r )<sup>n</sup> | |||
= 1.06<sup>2</sup> | |||
= 1.1236. | |||
== See also == | |||
* [[Compounding effect]] | |||
* [[Discount factor]] | |||
* [[Future value]] | |||
* [[Present value]] |
Revision as of 11:52, 21 March 2015
(CF).
A number greater than one which we multiply a present value by, to work out its Future Value (FV) as:
FV = CF x present value.
The periodic Compounding Factor is calculated from the periodic yield as:
CF = ( 1 + periodic yield ).
Example
Annual effective yield (r) = 6%.
Number of years in the total period (n) = 2.
Then:
Compounding Factor = ( 1 + r )n
= 1.062
= 1.1236.