Time Value of Money Compound Interest Formulas

This page describes how different TVM calculators calculate compound interest when dealing with fractional number of periods.

This diagram is from an HP-12C Manual on the formulas used for compound interest:

 

The HP 12C uses these formulas when calculating the TVM values. The first formula is only used when "n" is an integer. (Actually, formulas 2 and 3 equal formula 1 for integer n).

The second and third formulas are used when there is a fractional part to "n". The second formula uses simple interest from the fractional part, the third formula uses compound interest for the fractional part.

Financial calculators (that I know of) made after the 12C (10bii, 17bii, TI BA) use the first formula if "n" is an integer or has fractional parts.

CALC 1 Calculators that use formula 1 even with 'n' with fractional parts:

• Financial Time Value of Money I/YR Calculator
• Loan Form Calculator
• Time Value of Money Form Calculator

CALC 1 Calculators that use formula 2 and 3 for 'n' with fractional parts:

• HP 12CP Calculator Reproduction
• Time Value of Money with Odd Periods and Simple Interest Calculator
• Time Value of Money with Odd Periods and Compound Interest Calculator