Sharp EL-738 operation manual Compound interest, Cash flow diagrams

Compound interest

This calculator assumes interest is compounded periodically in financial calculations (compound interest). Compound inter- est accumulates at a predefined rate on a periodic basis. For example, money deposited in a passbook saving account at

a bank accumulates a certain amount of interest each month, increasing the account balance. The amount of interest received each month depends on the balance of the account during that month, including interest added in previous months. Interest earns interest, which is why it is called compound interest.

It is important to know the compounding period of a loan or investment before starting, because the whole calculation is based on it. The compounding period is specified or assumed (usually monthly).

Cash flow diagrams

The direction of arrows indicates the direction of cash movement (inflow and outflow) with time. This manual uses the following cash flow diagrams to describe cash inflows and outflows.

	Present
Inflow (+)	value (PV)
			Time
Cash
flow				. . . . . .
		Payment (PMT)
Outflow (–)					Future
					value (FV)

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