## 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”

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