Important Calculations in Personal F

7/24/2019 Important Calculations in Personal F

1/11

Some Important Formula's in PersonalFinance

1. Compound Interest :2. Annuity

3. CAGR

Manis Cauan

ttp:!!""".#a$oin%estor.com


2/11

Compound Interest

&is ormula is used to calculate uture %alue o (ne timepayment today ater some years .

Future )alue * Present )alue + ,1 - rate/&enure

Rate * 0pected rate o Return

&enure * umer o years


3/11

0ample 1 ,Compound Interest

I "ant to in%est Rs 456555 in a Fied 7epositor 4 yrs at 89 rate o return . o" muc "ille te maturity %alue

Future )alue * 456555 + ,1 - .58 / 4

* ;3


4/11

0ample 2 ,Compound Interest

I "ant to in%est Rs 156555 in a mutual und today6 o" muc "ill it ecome ater 15 yrs 6considerin$ te rate o return o 149 .

Future )alue * 156555 + ,1 - .14 / 15

*


5/11

Annuity

&is ormula is used to calculate te uture %alue "en "e do in%estmenton a re$ular asis ater a ied inter%al .

Example

> "en "e in%est in a mutual und per mont trou$ SIP .> ?en "e put money in our PPF account eac year .

Formula

Future value* Amount per installment + ,1-r + @,1-r /n > 1!r


6/11

0ample 1 ,Annuity

I "ant to in%est Rs 456555 in a my PPF account per yearor net 14 yrs 6 o" muc "ill it ecome ater 14 yrs 6 at89 .

Future )alue * 456555 + ,1.58 + ,1.58 / 14 > 1!.58

* 1


7/11

0ample 2 ,Annuity

I "ant to in%est Rs 16555 in a mutual und per mont ornet 15 yrs 6 o" muc "ill it ecome ater 15 yrs 6considerin$ te rate o return o 129 .

r * rate o return * 12!12 * 19 ,per montn * numer o payments * 12 + 15 * 125Future )alue * 16555 + ,1.51 + ,1.51 / 125 > 1!.51

* 23233B


8/11

CAGR : Compounded annual Gro"t Rate

> sed to calculate te annual Return pro%ided y anIn%estment .> &ool to compare in%estments> (pposite o Compound Interest

Formula

CAGR = nth root of [(Current Value / ri!inal Investment"#$

n * tenurent root * to te po"er 1!n


9/11

0ample 1 ,CAGR

I In%ested Rs 456555 in a mutual und on Dune 2554 6 Its %alueater < yrs is Rs 16556555 . ?at is te annual returns it aspro%ided to me E

CAGR * @,155555 !45555/ ,1! 1

* 2 / .24 > 1* .18B2

* 18.B29 Annual return


10/11

0ample 2 ,CAGR

?ic in%estment is etter EIn%estment 1 : 456555 in%ested in 2555 ecame 26556555 in 255BIn%estment 2 : 156555 in%ested in 255< ecame 246555 in 2558

CAGR or In%estment 1 * @255555!45555/,1!B > 1* 1=.=4 9

CAGR or In%estment 2 * @24555!15555 / ,1! 1* 24.;


11/11

&ans

Important Calculations in Personal F

Documents

Transcript of Important Calculations in Personal F