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# You Must Know All These Formulae for Proper Financial Planning

## 1. Compound Interest

Formula:
A = P * (1+r/t) ^ (nt)
Where
A = amount after time t
P = principal amount (your initial investment)
r = annual interest rate (divide the number by 100)
t = number of years
n = number of times the interest is compounded per year

## 2. Post Tax Return

Formula:
Return = Interest rate – (Interest rate*tax rate)

## 3. Inflation

Formula:
Future Amount=Present amount*(1+inflation rate)^number of years

## 4. Purchasing Power

Formula:
Future Value=Present value/(1+inflation rate)^number of years

## 5. Effective Annual Rate

Formula:

Effective Annual Rate = (1+(r/n))^n)-1*100
Where
r = nominal return divided by number of times compounding is done in a year
n = number of times compounding is done in a year

## 6. Rule of 72

The thumb rule is divide 72 by the interest rate
Example
If you are assuming a 12 % return on your investment,
the number of years in which the money will double is
= 72/Interest rate = 72/12 = 6 years

## 7. Compounded Annual Growth Rate (CAGR)

Formula:
CAGR=((FV/PV)^(1/n)) – 1
Where
FV is the investment’s ending/maturity value
PV is the investment’s beginning/opening value
n is the duration in years

## 8. Loan EMI

Formula:
EMI= (A*R)*(1+R) ^N/ ((1+R) ^N)-1)
Where
A = Loan amount
R = Interest rate
N = Duration

## 9. Future Value of SIP

Formula:
S = R((1+i)^n-1/i) (1+i)
Where
S = Future value of investment
R = Regular monthly investment
i = Interest rate assumed /12
n = Duration (number of months or number of years *12)

## 10. Liquidity Ratio

Formula:
Liquidity Ratio = Total liquid assets/Total current debt

Dharmendra Satapathy

## One reply on “You Must Know All These Formulae for Proper Financial Planning” SHRINIWAS DANDEKARsays:

tHANKS FOR SHARING SIR. IT WILL BE OF GREAT HELP..