Formulas from finance

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Section B.4 Formulas from finance

Compound Interest Formula

a = p {(1 + \frac{r}{12})}^{12 y}

$a$ = account balance ($)
$y$ = time invested (years)
$p$ = initial deposit or “principal”
$r$ = interest rate compounded monthly (as a decimal)

Equivalent APR Formula

APR = {(1 + \frac{r}{12})}^{12} - 1

where

r

= interest rate compounded monthly (as a decimal)

Future Value Annuity Formula

a = p * \frac{{(1 + \frac{r}{12})}^{12 y} - 1}{\frac{r}{12}}

$a$ = account balance ($)
$y$ = time invested (years)
$p$ = regular (monthly) deposits ($)
$r$ = interest rate compounded monthly (as a decimal)

Loan Payment Formula

p = \frac{a * \frac{r}{12}}{1 - {(1 + \frac{r}{12})}^{- 12 y}}

$a$ = loan amount ($)
$y$ = time invested (years)
$p$ = regular (monthly) payment ($)
$r$ = interest rate compounded monthly (as a decimal)

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