Learning about key inputs for calculating projections
Before we start writing more code, we will cover a few basic terms and formulas that will come in handy in this chapter:
- Future Value: This is how we calculate the value of our investment in the future, based on the interest rate and investment period:
Where:
- FV is the future value
- PV is the present value
- r is the interest rate
- n is the number of periods
- Compound Interest: Whenever you apply an interest rate repeatedly, you end up compounding the interest. There is a slight change from the FV formula:
Where:
- FV is the future value
- PV is the present value
- r is the interest rate
- n is the number of periods
- t is the number of years
- Annuity: If we wish to make regular deposits, we will need to calculate an annuity as well. An annuity is effectively compound interest but with regular contributions. The formula is as follows...
