Frequency of compounding affects both future and present values of cash flows. While we usually start out assuming "annual" periods interest and inflation typically compound more frequently. Thus we must always concern ourselves with the effective annual rate (EAR): \begin{tabular}{l|c|c|} \hline & Rate % & t (days) \\ \hline & & \\ \hline Annual & 10% & 1 \\ \hline Semi-annual & 10% & 2 \\ \hline Monthly & 10% & 12 \\ \hline Daily & 10% & 365 \\ \hline Continuous & 10% & n/a \\ \hline & & \\ \hline & & \\ \hline & & \\ \hline \multicolumn{1}{|c|}{ EXCEL } & & YOUR \\ \hline NOTATION & & INPUTS \\ \hline & & \\ \hline r & Int. Rate & \\ \hline n & Periods/Yr & \\ \hline \end{tabular} Frequency of compounding affects both future and present values of cash flows. While we usually start out assuming "annual" periods interest and inflation typically compound more frequently. Thus we must always concern ourselves with the effective annual rate (EAR): \begin{tabular}{l|c|c|} \hline & Rate % & t (days) \\ \hline & & \\ \hline Annual & 10% & 1 \\ \hline Semi-annual & 10% & 2 \\ \hline Monthly & 10% & 12 \\ \hline Daily & 10% & 365 \\ \hline Continuous & 10% & n/a \\ \hline & & \\ \hline & & \\ \hline & & \\ \hline \multicolumn{1}{|c|}{ EXCEL } & & YOUR \\ \hline NOTATION & & INPUTS \\ \hline & & \\ \hline r & Int. Rate & \\ \hline n & Periods/Yr & \\ \hline \end{tabular}