Formulas for Finance Math
Formulas for Finance Math
m = the number of compunding periods per year. (annually m=1, semiannually m=2, quarterly m=4, monthly m=12, daily m=365) r = the annual interest rate as a decimal. (12% = 0.12) t = the time in years. (6 months = 0.5 years)
Simple Interest
I = Prt
Future Value
A = P1 + mr mt
Simple Interest (P = principal)
Future Value
A = P + Prt
Compound Interest (P = principal)
Present Value
P
=
1 +
A mr
mt
Present Value
P
=
A (1 + rt)
Continuous Compounding ( e = 2.71828)
A = Pert P = Ae-rt
Future Value: Annuities and Sinking Funds (FV = future value=S, PMT = payment=R)
FV
=
PMT
1
+
mr mt
- 1
mr
PMT
=
FV
mr
1
+
mr
mt
- 1
Present Value: Annuities and Amortization (PV = present value=P, PMT = payment=R)
PV
=
PMT
1
-
1 +
r m
mr
-
mt
PMT
=
PV
1 -
mr 1 + mr
- mt
................
................
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