On interest rates.

[Yoni]

The formula used for compound interest is: FV(n) = P(1 + r/n)^(Yn)

According to that formula, if the yearly interest rate is 10%, and you pay quarterly instead of yearly, the quarterly interest rate becomes 2.5%! (0.1/4...)
That is clearly bullshit.
Interest rates are exponential. The interest rate should have become 1.1^(1/4) = 1.024.., or 2.4%.

Then, the correct formula becomes FV(n) = P[(1 + r)^(1/n)]^(Yn)
If you calculate based on that assumption you will notice that continuous and discrete interest rates are the same.
(It's easy to notice that the n actually cancels out in the above formula... FV(n) is not dependent on n!)

Yes, I assert that banks give you too much money because some idiot considered exponential interest rates as linear.

Thoughts?