Calculating the future value of cash flow by compounding
In the long-term financial and credit operations if the interest paid as soon as they accrue and are added to the debt, the method of compound interest. When using this method of charging compound interest basis remains constant - it increases every spell and the process of accumulation is accelerating.
Compounding method can be used to determine future debt in credit operations.
Using the formula of the future value of money can be defined yield shares.
When entering into financial agreements often assumed cash flows that arrive or sail in equal amounts at regular intervals. For example, rent payments, payments on bonds and more.
Receipts or payments of the same size, which are carried out at regular intervals for a specified period, called annuity or rent.
Rent payments may be made either at the end or beginning of each period. In the first case there is the usual rent, and the second - promissory notes. In practice, the most common is the usual rent.