Business Mathematics 5 types of transactions / questions Simple Interest – flat rate of interest Compound Interest – invest a single amount and see what it will grow to – PV Present value grows to FV Future Value Compound Interest – the reciprocal of (2) above – someone promises to give you a single amount at a future date FV – what is it’s value today – PV – present value Compound Interest – Deposit a regular amount – annuity and see what it will grow to FV Compound Interest – Receive a single amount today (Loan) what future income payments will be the equivalent of this loan amount OR Invest a single amount today what future income stream (annuity) should I expect to receive from this investment

Using the Formula

Using the Financial Calculator

Using Tables

Opening 8% Closing Year Balance Interest 1 1000 80 1080 2 86 1166 3 93 1260 4 101 1360 5 109 1469

Note 1/ 1.9738 = .5066 from the table below So 1000 / 1.9738 or 1000 x .5066 will give us the right answer

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Just showing the advantages of the Financial Calculator

Just showing the advantages of the Financial Calculator

The only reason you would need the following is if your calculator broke in an exam – I can’t see that happening – and anyway I would lend you mine…… I have two

Note 4, xy, 10.38, 2nd F , APR (PMT) = approximately 10% since we rounded 10.38%

2, xy, 12, 2nd F , EFF (PV) = 12.36 4, xy, 12, 2nd F , EFF (PV) = 12.55 12, xy, 12, 2nd F , EFF (PV) = 12.68