Professional Documents
Culture Documents
Applications of Algebra
Portion
Rate = (1-1)
Base
Sum of ( Weighting factor × Value )
Weighted average =
Sum of weighting factors
V f −Vi
c = × 100% (2-1)
Vi
Income
Income yield = × 100%
Vi
Capital gain
Capital gain yield = × 100% (2-2)
Vi
Income + Capital gain
Rate of total return = × 100%
Vi
V f = V i 1c 1 1c 2 1c 3 ⋯ 1c n (2-3)
Simple Interest
I = Prt (6-1)
S = P(1+rt) (6-2)
Compound Interest
Single Payment:
j
i= (8-1) n = m × (Number of years in the term) (8-3)
m
FV = PV (1 + i ) n PV = FV ( 1 +i )
−n
and (8-2)
FV = PV (1 + i1 ) (1 + i2 ) (1 + i3 ) ⋯ (1 + in ) (8-4)
1
FV FV n
(9-1)
i = n −1 = −1
PV PV
ln ( FV PV )
n = (9-2)
ln (1 + i )
m
f = 1i −1 (9-3)
i 2 = (1 + i1 ) m 1 /m 2 −1 (9-4)
Annuities:
(1 + i ) n −1 1 −(1 +i ) −n
FV =PMT (10-1) PV =PMT
i
i
(10-2)
i × FV i ×PV
ln 1 + ln 1−
PMT (10-1n) PMT
n = n=−
ln (1 + i ) ln (1 +i )
(10-2n)
Number of compoundin gs per year
i 2 = (1 + i ) c − 1 (9-4c) c =
Number of payments per year
(10-3)
PMT
PV = (12-1)
i
(1 + i ) n −1
FV ( due ) =PMT ×(1 +i ) (13-1)
i
1 −(1 +i )−n
PV ( due ) =PMT ×(1 +i ) (13-2)
i
i × FV (due) i ×PV (due)
ln 1 + ln 1−
PMT (1 + i ) (13-1n) PMT (1 +i )
n= n=−
ln (1 + i ) ln (1 +i )
(13-2n)
( 1 + i ) n − ( 1 + g ) n 1 − ( 1 + g ) n ( 1 + i ) −n
FV = PMT (12-2) PV = PMT (12-3)
i−g i −g
Bonds:
1 − (1+ i ) −n
Bond price = b( FV ) + FV (1 + i )
−n
(15-1)
i