Simple Interest
To determine future value (FV) using simple interest (i.e., without compounding):
where PV is the present value or principal, t is the time in years (or a fraction of year), and r stands for the per annum interest rate. Simple interest is rarely used, as compounding is considered more meaningful. Indeed, the Future Value in this case grows linearly (it's a linear function of the initial investment): it doesn't take into account the fact that the interest earned might be compounded itself and produce further interest (which corresponds to an exponential growth of the initial investment -see below-).
Read more about this topic: Future Value
Famous quotes containing the words simple and/or interest:
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—Alexis de Tocqueville (1805–1859)
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—Rose Wilder Lane (1886–1968)