This document provides comprehensive notes for the Theory of Interest 152 module, covering key concepts, formulas, and notation from Chapter 1 to Chapter 2.5. It is structured as a detailed summary of the initial chapters, focusing on the foundational principles of financial mathematics, time value...
theory of interest 152 Complete notes for all chapters- includes examples with explanations and how to use HP calculator
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Stellenbosch University (SUN)
Theory Of Interest 152 (TOI152)
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TOI:
1: Equations
K=Capital amount - PV
S=Accumulated amount - FV
i=Effective amount -
i^(m)=Nominal interest per year - I/YN
m=How many times per year will you earn interest -
n= How many years
N= How many interest periods (n x m) -N
+Rand amount (PV, P, FV) you are getting money in your pocket
: Getting a loan
: Withdrawing money from your account
-Rand amount (PV, P, FV) you are giving money from your pocket to somebody
else
: Making a loan payment
: Investing money in an an account
Simple interest:
- No interest on interest
- S = K + (K*i)n
- S = K + (1 + in)
- Not on financial calculator
If i is in ½ year then n must also be in ½ year ( or x2 the years)
n=i
, 2: Compound interest
Compound interest:
- Interest on interest
- Just know the notation
- Use time value of money functions
To find the present value
V notations = the value infront of v is the future value
number between brackets is how many times a year interest is compounded
Interest during a specific period:
Int = End – Beginning
Beginning End
If there is a V it tells you that it is the future value.
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