# Definition for : Capitalisation

GLOSSARY LETTER

Capitalisation of Income means to forego receipt of it. It then becomes capital and begins itself to produce Interest over subsequent periods. The capitalisation formula runs as follows:Vn = V0 x (1 + t)n, where Vn is the terminal capital, V0 - the initial Investment, t Rate of return, n Duration of the Investment.

(See Chapter 16 The time value of money and net present value of the Vernimmen)

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