1. Simple interest and compound interest

Simple interest calculation formula: I = p * I * T.

P- principal, (present value) is also called initial amount or present value;

I- interest rate, usually refers to the ratio of annual interest to principal;

L- interest; (interest)

S- the sum of principal and interest, also called the sum or final value of principal and interest;

Time is up.

Compound interest final value = present value × compound interest final value coefficient

2. The final value and present value of compound interest

(1) compound interest final value

S=P( 1 + t)^n

Where (1+t)n is called the compound interest final value coefficient or compound interest final value 1 yuan, and is represented by the symbol (s/p, i, n).

(2) Present value of compound interest

P=S( 1 + t) ^(-n)

Where (1+t) (-n-n) is called the compound interest present value coefficient, or the compound interest present value of1yuan is expressed by (p/s, i, n).

There are two ways to calculate the time value of money: simple interest and compound interest.

(1) Simple interest means that only the principal is calculated for each interest period. No matter how long the term is, the interest generated from the principal is not added to the principal, and then the interest is calculated.

(2) Compound interest means that not only the principal should be calculated with interest, but also the interest generated should be added to the principal every interest period, and the interest should be calculated on a rolling basis, commonly known as "rolling interest". The interest period can be year, month and day. Unless otherwise specified, the interest period usually refers to 1 year. When calculating the time value of money, the compound interest method is usually used.