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For a loan that accrues daily and compounds yearly with a 10% annual interest rate, why is 100*(1+.10)^1.5 equal to 115.369, and not 115.50?
Does the future value formula not work when trying to calculate compounded interest intra-period? Does the number of periods have to be an integer? How should one calculate accrue interest intra-period. Would I have to manually calculate the accrued partial period interest after using the future value formula for an integer number of periods?
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For daily compounding for 1.5 years it is 100*(1+0.1/365)^(1.5*365)=116.1810374
However as you said it is yearly compounding 100*(1.1)^1.5 gives 1.153689733. So after 1 year whatever is the amount you get simple interest for 1/2 year to get 100*1.1*1.05=115.5
Last edited by thickhead (2016-07-08 19:26:21)
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