1. Problems Involving Percents
Procedure for Finding Percent Increase or Decrease
Step 1 Find the amount of the increase or the decrease.
Step 2 Make a fraction as shown:
Step 3 Change the fraction to a percent.

2. Interest Formulas for Computing Simple Interest and Final Value
1. Interest = principal x rate x time:
I = Prt
2. Future value principal interest:
A = P + I or A = P (1 + rt)

3. The Banker’s Rule
The Banker’s rule treats every month like it has 30 days, so it uses 360 days in a year, instead of 365. They claim that the computations are easier to do.
When a lending institution uses 360 days instead of 365, how does that affect the amount of interest?
For example, on a $5,000 loan at 8% for 90 days, the interest would be

4. Compound Interest Formula for Computing Compound Interest
where A is the future value (principal + interest)
r is the yearly interest rate in decimal form
n is the number of times per year the interest is compounded
t is term of the investment in years

5. Effective Interest Rate
The effective rate (also known as the annual yield or nominal rate) is the simple interest rate which would yield the same future value over 1 year as the compound interest rate.
Formula for Effective Interest Rate
where E = effective rate
r = interest rate per year (i.e., stated rate)
n = number of periods per year the interest is calculated

6. Annuities Formula for Finding the Future Value of an Annuity
where A is the future value of the annuity
R is the regular periodic payment
r is the annual interest rate
n is the number of payments made per year
t is the term of the annuity in years

7. Annuity Payments
Formula for Finding Regular Annuity Payments Needed to Reach a Goal
where A is the future value of the annuity
R is the regular periodic payment
r is the annual interest rate
n is the number of payments made per year
t is the term of the annuity in years

8. Actuarial Method where u = unearned interest
k = number of payments remaining, excluding the current one
R = monthly payment
h = finance charge per $100 for a loan with the same APR and k monthly payments

9. The Rule of 78 where u = unearned interest f = finance charge
k = number of remaining monthly payments
n = original number of payments

10. Average Daily Balance Method
Procedure for the ADB Method
Step 1 Find the balance as of each transaction.
Step 2 Find the number of days for each balance.
Step 3 Multiply the balances by the number of days and find the sum.
Step 4 Divide the sum by the number of days in the month.
Step 5 Find the finance charge (multiply the average daily balance by the monthly rate).
Step 6 Find the new balance (add the finance charge to the balance as of the last transaction).

11. Computing Monthly Payments
Formula for Computing Monthly Payments on a Mortgage
R = regular monthly payment
P = amount financed, or principal
r = rate written as a decimal
n = number of payments per year
t = number of years

12. P/E Ratio
The P/E ratio of a stock is a comparison of the current selling price to the company’s
earnings per share.

13. Annual Earnings Per Share
Knowing the price per share of stock and the P/E ratio, you can find the annual earnings per share for the last 12 months by using the following formula:

14. Current Yield for Stock
The current yield for a stock can be calculated by using the following formula: