Financial Mathematics Revision Points

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.

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.

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.

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.

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.

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.

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.