Normally when computing compound interest the compounding period is a discrete interval, annually, quarterly, monthly, weekly etc. There is nothing however to stop the compounding period getting smaller and smaller until eventually interest is calculated on the balance of the principal amount plus accumulated interest on a continuous basis.
The loan balance annuity formula is used to find the balance outstanding on a loan by calculating the present value of the remaining loan installments. The payments are for the same amount, made at the end of each period, and a discount rate i% is applied.
The NPV (net present value) of an investment is calculated by adding together the present value of each of the individual cash flows associated with the investment. The purpose of this tutorial is to discuss the effect of taxation and depreciation on each of the investment cash flows and, as a result, on the NPV of the investment itself.
The stock valuation calculator works out the price of a stock using the present value of a growing perpetuity formula. The calculator is based on the Gordon growth model, and assumes dividend payments are growing at a constant rate each period and continue forever.
The present value of a growing annuity formula is used to calculate the present value of a series of periodic payments which increase at a constant rate each period. The payments made at the end of each period, and a discount rate i% is applied.
The present value of an annuity due formula is used to calculate the present value of a series of periodic payments. The payments are for the same amount, made at the start of each period, and a discount rate i% is applied.
The Excel PV function is one of many Excel financial functions, and can be used to calculate the present value in excel of a lump sum, an annuity, or an annuity due. It has the syntax PV (Rate, Nper, Pmt, FV, Type).