Financial Mathematics Flashcards

Grade 12 · Math · Flashcards

Essential formulas and concepts for solving compound interest, annuity, and loan problems in Grade 12 math.

Flashcards

Simple Interest: I = Prt; total interest = principal × rate × time
Compound Interest Formula: A = P(1 + r/n)^(nt)
Continuous Compounding: A = Pe^(rt)
Effective Annual Rate: EAR = (1 + r/n)^n - 1
Rule of 72: Doubling time ≈ 72 / annual interest rate (%)
Present Value (single payment): PV = FV / (1 + r)^t = FV · (1+r)^(-t)
Future Value of Ordinary Annuity: FV = PMT · [(1+i)^n - 1] / i
Present Value of Ordinary Annuity: PV = PMT · [1 - (1+i)^(-n)] / i
Loan Payment Formula: PMT = PV · i / [1 - (1+i)^(-n)]
Amortization: Repaying a loan through equal periodic payments; early payments are mostly interest, later ones mostly principal
Net Present Value (NPV): Sum of discounted future cash flows minus initial investment; positive NPV means a profitable investment
Nominal vs Effective Rate: Nominal = stated annual rate r; effective (EAR) accounts for compounding frequency and is always ≥ nominal