Grade 12 Maths Finance Notes

“Finance”
IMPORTANT FORMULAE
ANNUITIES

BALANCE ON LOAN

THE LAST PAYMENT
SINKING FUND

, IMPORTANT FORMULAE
You will use the following formulae to solve problems involving Financial
Mathematics. In the examination the formulae will be given to you on a
formula sheet. It is important that you know what each variable represent
and how to use each formula.


FORMULA
FORMULA EXPLANATION
EXPLANATION

A =AP=(P1 +
( 1ni+ )ni ) Simple interest
Simple interest

A =AP=(P1 +
( 1i +) i )n
n Compound interest
Compound interest

A =AP=(P1 –
( 1ni– )ni ) Straight lineline
Straight depreciation
depreciation

A =AP=(P1 –
( 1i –) i )n
n Reducing balance
Reducing depreciation
balance depreciation
)𝑛 i–)n
x [ (x1[+( 1i + 1 ]– 1 ] Future value formula
Fv Fv
= = Future value formula
𝑖 𝑖
−𝑛 ]
Pv Pv
= =
x [ 1x–[ (11–+( 1
i )+ i )−n ] Present value
Present formula
value formula
i i
im
1 + 1ie+=ie( =1 (+ 1 + )im
m m Convert between
Convert betweeneffective andand
effective
𝑚 𝑚 ) nominal interest rates
nominal interest rates

i = ieffective interest
= effective rate
interest andand
rate im is
im the
is the!!FORMULA NOTNOT
!!FORMULA ON ON
FORMULA
FORMULA
nominal interest rate
nominal interest rate SHEET!!
SHEET!!

repaid = loaned
repaid – outstanding
= loaned – outstanding Interest paidpaid
Interest
= x= x

interest = (months
interest x instalments)
= (months – x– x
x instalments)
= interest
= interest
You will use the following formulae to solve problems involving Financial
Mathematics. In the examination the formulae will be given to you on a
formula sheet. It is important that you know what each variable represent
and how to use each formula.