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Financial Formulas Explained Simply

The document explains five financial concepts: Simple Interest, Percentage Change, Unit Rate, Basic Ratio, and the Rule of 72, each with formulas and examples. Simple Interest calculates the interest earned on a principal over time, while Percentage Change measures the increase or decrease in value. Unit Rate compares prices, Basic Ratio expresses relationships between quantities, and the Rule of 72 estimates the time required for an investment to double based on interest rates.

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Anna Dela Cruz
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5 views3 pages

Financial Formulas Explained Simply

The document explains five financial concepts: Simple Interest, Percentage Change, Unit Rate, Basic Ratio, and the Rule of 72, each with formulas and examples. Simple Interest calculates the interest earned on a principal over time, while Percentage Change measures the increase or decrease in value. Unit Rate compares prices, Basic Ratio expresses relationships between quantities, and the Rule of 72 estimates the time required for an investment to double based on interest rates.

Uploaded by

Anna Dela Cruz
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

1.

Simple Interest
●​ Formula: I=P×r×tI = P \times r \times t​

○​ I = Interest​

○​ P = Principal (original amount)​

○​ r = Annual interest rate (in decimal form)​

○​ t = Time (in years)​

●​ Example: If you invest ₱10,000 at 5% per year for 3


years:​
I=10,000×0.05×3=₱1,500I = 10,000 \times 0.05
\times 3 = ₱1,500 interest.​

2. Percentage Change
●​ Formula: New−OldOld×100%\frac{\text{New} -
\text{Old}}{\text{Old}} \times 100\%​
●​ Meaning: Shows how much something has increased
or decreased in percentage terms.​

●​ Example: A bag used to cost ₱400, now costs ₱500:​


500−400400×100%=25%\frac{500 - 400}{400} \times
100\% = 25\% increase.​

3. Unit Rate
●​ Formula: Price ÷ Quantity = Cost per unit​

●​ Meaning: Helps compare prices to find the best deal.​

●​ Example: ₱150 for 5 kg of rice: ₱150 ÷ 5 = ₱30 per


kg.​

4. Basic Ratio
●​ Meaning: A way to compare quantities by expressing
their relationship in simplest form.​

●​ Example: In a class of 12 boys and 8 girls, the ratio


of boys to girls is:​
12:812:8 → simplified to 3:23:2.​

5. Rule of 72
●​ Meaning: A quick way to estimate how long it will
take for an investment to double at a fixed annual
interest rate.​

●​ Formula: 72÷interest rate72 \div \text{interest rate}​

●​ Example: At 6% interest per year:​


72÷6=1272 \div 6 = 12 years to double the money.​

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