What will happen to this formula if i=0?

I was thinking what would be present worth if there was no interest. but, it turned out t to be infinite, which i find funny.

am i right?

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3 Answers

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  • 1 month ago

    First, this question should have been placed in the Business & Finance category,

    not Astronomy & Space.

    A = principal amount = $10,000

    n = number of payment periods = 48

    i = interest rate per period = 0% = 0.0

    P = present worth = to be determined

    P = A{[(1 + i)^n - 1] / [i(1 + i)^n]}

    P = $10,000{[(1 + 0)^48 - 1] / [0(1 + 0)^48]}

    In the formula that you have quoted, P does go to infinity if i = 0.

    This is because the variable I is in the denomonator and as I goes

    to zero, then P becomes bigger and bigger until it approaches

    infinity. Are you sure that this formula is correct?

  • Acetek
    Lv 4
    1 month ago

    i is the square root of -1 it can never be 0

  • Jim
    Lv 7
    1 month ago

    no, but with no interest, it becomes simple principle payments

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