Specifications

21
Compound interest
This calculator assumes interest is compounded periodically in
financial calculations (compound interest). Compound inter-
est accumulates at a predefined rate on a periodic basis. For
example, money deposited in a passbook saving account at
a bank accumulates a certain amount of interest each month,
increasing the account balance. The amount of interest received
each month depends on the balance of the account during that
month, including interest added in previous months. Interest
earns interest, which is why it is called compound interest.
It is important to know the compounding period of a loan or
investment before starting, because the whole calculation is
based on it. The compounding period is specified or assumed
(usually monthly).
Cash flow diagrams
The direction of arrows indicates the direction of cash movement
(inflow and outflow) with time. This manual uses the following
cash flow diagrams to describe cash inflows and outflows.
Payment (PMT)
......
Inflow (+)
Cash
flow
Present
value (PV)
Future
value (FV)
Time
Outflow (–)
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