Coincidentally, both debt instrument examples are what is known as “bullet” loans, where the entire principal amount ($100) is repaid in one lump sum at maturity (at the end of Year 5). In the first example the interest income payments are deferred until maturity, thereby allowing the interest to compound over the holding period. In the second example, the interest income payments are made at the end of each year, which means that the amount of debt accruing interest each year is always the same ($100).
Now let us consider a slightly more complex investment with compounding interest where the interest rate differs year-to-year. Because the interest rate varies, you can’t use the simple formula above (or its FV function equivalent in Excel). Rather, you must effectively stack each year on top of the preceding year and calculate year-by-year.
And that’s something you can do with DAX.