Single Payment Compound Amount
Single-Payment Compound Amount
Here,
the objective is to find the single future sum (F) of the initial payment (P)
made at time 0 after n periods at an interest rate i compounded every period.
Cash
flow diagram of single-payment compound amount
The
formula to obtain the single-payment compound amount is
F = P (1
+ i)n = P (F/P,
i, n)
Where,
(F/P, i,
n) is called as single-payment compound amount factor.
Example problem for single- payment compound amount
A person deposits a sum of Rs 50,000 at the
interest rate of 10% compounded annually for 10 years. Find the maturity value
after 10 years.
Given data
P = Rs.
50,000
i = 10%
n = 10
years
To find
F
Formula used
F = P (F/P,
i, n)
Solution
F = P (F/P, i, n)
= 50,000 (F/P, 10%, 10)
= 50,000 * 2.594
F = Rs. 1,29,700
Result
The maturity value of
Rs.50,000 for 10 year at the interest rate of 10% is Rs. 1,29,700.
