2.4 The Time Value of Money

Interest Factor Nomenclature and Symbols

Several symbols for the interest factors have been used in a variety of textbooks on the subject of Engineering Economy. The nomenclature used in this textbook has become somewhat of a standard. Writing the interest factors as shown in the textbook allows one to ensure that the proper interest factor is being applied by looking at the 'algebraic' operation of the money value being converted with the first argument of the interest factor. For example, converting a uniform annual series at i% for n periods to a future sum is written as,

F = A(F/A, i, n)

Of course, the interest factor (the compound amount factor) has a specified value based on i and n according to the expression given in Table 2.2. However, if one algebraically multiples A * F/A, it is clear that the the A's cancel and you are left with F, which is the desired result. This is a quick way to ensure that the proper interest factor is being applied.