Energy Project Financing : Resources and Strategies for Success

Appendix A 211

Table A-5. The Mathematics of Compound Interest

——————————————————————————————————————— Year

Amount At

Interest Earned

Amount At End

Beginning Of

During Year

Of Year

(t)

Year

(F

)t

——————————————————————————————————————— 0

• 
  


• 
  

P

———————————————————————————————————————

1

P

Pi

P + Pi

= P (1 + i)

———————————————————————————————————————

2

P (1 + i)

P (1 + i) i

P (1+ i) + P (1 + i) i

= P (1 + i) (1 + i)

= P (1+i)

2

——————————————————————————————————————— 3

P (1+i)

2 P

(1+i)

2 i

P (1+ i)

2 + P (1 + i)

2 i

= P (1 + i)

2 (1 + i)

= P (1+i)

3

——————————————————————————————————————— n

P (1+i)

n-1

P (1+i)

n-1

i

P (1+ i)

n-1

+ P (1 + i)

n-1

i

= P (1 + i)

n-1

(1 + i)

= P (1+i)

n

———————————————————————————————————————