Finance & Banking Fundamentals

List of Formulae

Simple Interest (S.I) = P*r*t/100

Compound Interest (C.I) = [P*(1+r/100)^t – P]

CAGR = [(Final Value/Initial Value)^1/n]- 1

FV = PV*(1+r/100)^t

PV = FV/(1+r/100)^t

= PV of all cash inflows-PV of all cash outflows

NPV
e.g: NPV = -PV (C1) + PV (C2) + PV (C3)….

Inflation = Nominal Rate of Interest - Real Rate of Interest

= (Market value of the fund investments + Income receivable - Expenses payable)/

NAV
Total no. of Outstanding units

Market capitalization = Market Price * Number of Outstanding Shares of the Company

(cap for short)

Bond Price = Σ C / (1 + r /m )^m*t

C = Coupon or Cash flows
r = Yield Rate in the Market
m = Number of times compounding happens in a year
t = Time period in years

Trading Position = Total Purchases- Total Sales (could be in value or in quantity)

Spread = Average Lending Rate – Average Deposit Rate

NII = Interest Earned on Loans - Interest Paid on Deposits

Risk Weighted Assets = Asset Value*Risk Weight Assigned

CRAR =Capital/ Risk Weighted Assets (Term used for NBFCs)

Finance Charges = Interest Paid on Purchase Price for the Lease Period (Hire Purchase)

Lease Rental = [(Purchase Price ‐ Residual Value) + Finance Charges] /Lease Period

Net Owned Funds = Owners’ Equity – Losses (Term used for NBFCs)

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