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Financial Mathematics Key Formulas

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295 views2 pages

Financial Mathematics Key Formulas

Uploaded by

jusstchiomzy
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Financial Mathematics: Key Formulas by Topic

1. Simple Interest

- I = (P * R * T) / 100

- A = P + I = P(1 + (R * T) / 100)

2. Compound Interest

- A = P(1 + R/(n*100))^(nt)

- CI = A - P

3. Annuities

- FV (Ordinary): FV = R * ((1 + i)^n - 1) / i

- PV (Ordinary): PV = R * (1 - (1 + i)^-n) / i

4. Perpetuities, Shares and Stock

- Perpetuity: PV = R / r

- Yield: Yield = (Dividend / Market Price) * 100%

5. Capitalisation

- Capitalized Value = Net Annual Income / Capitalization Rate

6. Debt

- Debt-to-Equity Ratio = Total Debt / Total Equity

- Interest Coverage Ratio = EBIT / Interest Expense

7. Amortization and Sinking Fund

- Amortization: PMT = (P * i) / (1 - (1 + i)^-n)


- Sinking Fund: S = R * ((1 + i)^n - 1) / i

8. Investment in Bonds

- Price = Sum (Coupon / (1 + r)^t) + (Face Value / (1 + r)^n)

- Current Yield = Annual Coupon / Current Market Price

9. Depreciation

- Straight-Line: D = (C - S) / n

- Reducing Balance: BV_t = C(1 - r)^t

10. Endowment Funds

- FV = P(1 + r/n)^(nt)

11. Life Insurance Mathematics

- EPV = Sum (Benefit × Probability × Discount Factor)

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