# 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.