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
(P = principal)
Simple Interest Future Value Present Value
I = Prt A = P + Prt PA
rt
=+
()1
Compound Interest
(P = principal)
Future Value Present Value Continuous Compounding
( e = 2.71828)
AP r
m
mt
=+
⋅
1 PA
r
m
mt
=
+
⋅
1
A = Per⋅t P = Ae−r⋅t
Future Value: Annuities and Sinking Funds
(FV = future value=S, PMT = payment=R)
FV PMT
r
m
r
m
mt
=
+
−
⋅
11
PMT FV
r
m
r
m
mt
=
+
−
⋅
11
Present Value: Annuities and Amortization
(PV = present value=P, PMT = payment=R)
PV PMT
r
m
r
m
mt
=
−+
−⋅
11
PMT PV
r
m
r
m
mt
=
−+
−⋅
11
