2__Decision_Tree_for_Math_Finance

2__Decision_Tree_for_Math_Finance - m = 12 Compounded...

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d82622d5dc3d76722058faa99da8591214bbb1ec.doc 11/14/11 Decision Tree for Math Finance – Finance Formulas I Simple Compounded Interest Lump Sum (no series of deposits) Annuities (series of deposits or withdrawals) A= (future value annuity) Present = (present value annuity) Ordinary Due Use these two “ln” rules to find the value of an exponent. Rules of “ln”: Rule 1: If a=b, then ln a=ln b Rule 2: ln a x = x*ln a To find “n”, the number of time periods: ( 29 ( 29 i P A n + = 1 ln / ln (there is a “ln” key on calculator) For Doubling: n = ln(2) ln(1 + i) I = Prt A = P(1+rt) A = P+I KEY A = S = Future Value, Maturity Value m = Compounded Period A due = Future Value Annuity Due m = 1 Compounded Annually A ord = Ordinary Future Value Annuity m = 2 Compounded Semi-annually r = Annual interest rate/nominal rate m = 4 Compounded Quarterly r e = Effective rate
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Unformatted text preview: m = 12 Compounded Monthly i = Interest rate per period = r/m m= 365 Compounded Daily I = Total interest P = Present Value, Principal, Amount of loan when amortizing R = Annuity payment (PMT)/Regular Deposit/Regular Withdrawal t = Time in terms of years n = Number of time periods (mt) **Compounded Continuously: A = Pe rt FVA = Future Value Annuity PVA = Present Value Annuity A = P ( 29 n i + 1 **A = Pe rt I = A – P r e = ( 29 1 1-+ m m r A ord = R ( 29 -+ i i n 1 1 A due = R ( 29 R i i n- -+ + 1 1 1 P =R ( 29 +--i i n 1 1 To find “t” for compound continuously: r = ln (A/P) t Formula for outstanding balance, unpaid balance P =R ( 29 +---i i x n ) ( 1 1 x = payments made...
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