Interest Tables

A good set of interest tables, giving numerical values for all six types of basic  Interest formulae for different Interest rates and time periods, form part of every engineering 

economists library. Most standard finance/engineering economics text books include such tables. But the usefulness of such tables may be restricted  because of the linted range of 

values presented. In capital budgeting, and project analysis  etc., interest rates upto 25% and sometimes higher are often used. 

The table given in Appendix I (some rows are shown below) shows the various calculations on the basis of interest formulae discussed earlier for an interest rate of 10% Similarly, the table will contain the figures for interest rate normally upto 25%.

The first column of the table shows the compound amount factor. It shows that the amount  that a rupee accumulates to over N time periods. One rupee invested on at the interest rate of 10% accumulates  to Rs. 2.59 over 10 years period and to Rs. 6.75 in 20 years. In the second column, the present worth factors are mentioned. They are the reciprocals of the compound amount factor. For example, Re. 1 receivable in 10 years is worth only Rs. 0.386. Now, Rs. 2.59 receivable in 10 years has a present worth of 2.59 x 0.386 (Re. 1). The sinking fund factor in the third columns shows the amount that must be invested at 10% each year to accumulate  Re. 1 in 'n' years. For example. Rs. 62.75 must be invested aurally  to accumulate with interest to Rs. 1000 in 10 years 

The fourth column which relates to capital recovery factor, shows the annual payment required to cover principal amount and interest in equal annual amounts over an 'n' years period. 

A Rs. 1000 loan can be returned in 5 years by paying back Rs. 243.80 annually. A total of Rs. 1319 will be paid of which Rs. 1000 is principal  and Rs. 319 is the Interest. 

The compound  factor in the twelfth column shows that the total accumulation. with interest, of an equal amount invested each period for 'n' periods. If Rs. 1000 were invested each year at 10 percent for 20 years, the total amount that would accumulate at the end of the 20th year would be 1000 x 57.275 or Rs. 57275. In this case, Rs. 20000 represents the principal, the remaining Rs. 37275 being interest. 

The last column indicates the present worth of an uniform alarm source of payments. This shows that to purchase a Rs. 1000, 20 years, 10 percent annually requires a present payment of Rs. 8514. In a project returning Rs. 1000 annually for 20 years has a present value of Rs. 8514. 

In interest table, time periods usually are years, but they can be taken as quarters. months or ;my other units time. A 1.0 percent rate compounded monthly is roughly equivalent to a 12.0 percent rate compounded faultily or 6.0% rate compounded semi-annually or 3 percent rate compounded quarterly. For the values of fractional time periods or interest rates not included in an interest table, linear interpolation may normally be used. If more precision is required, either a calculator or log tables can be used to get the answer.