Interest Flashcards
1
Q
Simple interest
A
F_n = C0 ( 1 + ni )
2
Q
Compound interest
A
F_n = C0 ( 1 + i ) ^n
3
Q
i% pa effective
A
Rate of compound interest
Paid annually
4
Q
i_1/k
A
( 1 + i ) ^1/k - 1
5
Q
Inflation
A
The change in a price over time
6
Q
CPI
RPI
A
Consumer Price Index
Retail Price Index
7
Q
Principle of Consistency on 1 + i
A
( 1 + i_1/k ) ^k
8
Q
Money Rate of Return, i_M
A
The % return of an investment
9
Q
Real Rate of Return, i_R
A
The % return of an investment (considering inflation!)
10
Q
Rate of Return ~ Inflation relationship
A
1 + i_M = ( 1 + i_R ) ( 1 + inf )
1 + Money rate = 1 + Real Rate x 1 + Inflation
1 + M = 1 + R x 1 + inf
