Symbols and Functional Notation

i = Effective interest rate per interest period. In equations, the interest rate is stated as a decimal (that is, 8% interest is 0.08).

n = Number of interest periods. Usually the interest period is one year, but it could be something else.

P = A present sum of money.

F = A future sum of money. The future sum F is an amount n interest periods from the present that is equivalent to P at interest rate i.

A = An end-of-period cash receipt or disbursement in a uniform series continuing for n periods, the entire series is equivalent to P or F at interest rate i.

G = Uniform period-by-period increase in cash flows; the uniform gradient.

r = Nominal annual interest rate.

From Table A-1 we can see that the functional notation scheme is based on writing (To Find/Given, i, n). Thus, if we wished to find the future sum F, given a uniform series of receipts A, the proper compound interest factor to use would be ( F/ A, i,n).