# Financial Mathematics

# Financial Mathematics Revision Points

### Fundamental Concepts

- Understand the concept of
**interest**, both simple and compound. - Identify the differences between
**simple interest**(calculated on the initial investment only) and**compound interest**(calculated on the initial investment and accumulated interest). - Be familiar with the concepts of
**principal**,**rate**and**time**in the finance context. The principal refers to initial amount, rate is the interest per annum expressed as a percent, and time is the period for the interest calculation.

### Simple Interest

- Compute simple interest using the formula:
**I = prt**, where I is the interest, p is the principal, r is the rate, and t is time. - Understand how to rearrange the simple interest formula to make different factors the subject.

### Compound Interest & Exponentials

- Define and calculate annual, semi-annual, quarterly, monthly, and daily
**compound interest**using the formula:**A = P(1 + r/n)^(nt)**where A is the amount, P is principal, r is the annual interest rate, n is the number of times interest applied per time period and t is time in years. - Recognise that compound interest is an example of
**exponential growth**.

### Depreciation

- Understand the concept of
**depreciation**, which is the decrease in value of assets over time. - Calculate depreciation using the formula:
**V = P(1 - r/100)^n**, where V is the final value, P is the principal (initial value), r is the depreciation rate and n is the number of time periods. - Recognise that depreciation is an example of
**exponential decay**.

### Loan Repayments

- Understand what a
**loan**,**loan term**,**loan amount**,**interest rate**, and**monthly repayments**are. - Calculate loan repayments using formulas and also with the help of
**amortisation tables**.

### Annuities

- Understand the concept of an
**annuity**, a series of equal payments or receipts that occur at even intervals. - Be able to calculate the future value of an annuity using the formula:
**FV = P × ((1 + r)^n - 1) / r**, where FV is the future value, P is the annuity payment, r is the interest rate per period, and n is the number of payments.

### Practical Applications of Financial Mathematics

- Understand how these concepts apply in real-world scenarios like
**investments**,**loans**,**mortgages**,**savings**, and**other financial decisions**. - Develop problem-solving techniques for
**financial decision-making**scenarios, such as calculating the cost of a loan or the final value of an investment or savings account.