Multi-period Compounding or else Future Value :- If the company determination compounding interest half-yearly (semi-annually) instead of annually then investors will gain as he will get interest on half-yearly interest. Ever since interest will be compounded half-yearly for finding out the compound value.
FV = PV (1+i/m) n x m
Where FV = Future value of the preliminary flow in n years
PV= Initial Cash flow
i= Annual rate of interest
n = No. of years for which compounding is done.
m= No. of times compounding is done during a year.
Instance: - Mr. X invests Rs. 10000 at 10% p.a compounded semi-annually. Compute value after three years.
FV = PV (1+i/m) n x m
FV= 10,000 (1+.10/2) 3 x 2
FV = Rs. 11,025