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Use-case: Automatic rollover or renewal of deposit account
Appendix:
Algorithm to calculate Effective Annual Rate (EAR) = (1 + (i/n))^n -1 where,
- i = nominal interest rate
- n = number of compounding periods
Algorithm to calculate accrued interest due on future maturity date: use excel FV function where,
- rate = rate per compounding period e.g. in case of monthly rate (6% per annum / 12 months)
- number of periods = number of compounding periods in term/tenure e.g. 12 for a 12 month loans with monthly compounding
- present value = the amount of the deposit (the present value represented as a negative number)