Common Formulas Used In Investment

Simple Interest        

S.I. = Simple Interest          

P = Principal amount or Sum of amount      

R =  the annual rate of interest in the form of decimal e.g. 3% means r = 0.03

T = Total number of years you deposit money                    

S.I. = P*R*T/100                        


Compound Interest                                          
          
P = the principal (the money you first deposit)

r = the annual rate of interest in the form of decimal e.g. 3% means r = 0.03

n = the number of years you deposit your money

A = how much money you have accumulated after n years. This also includes the interest gained during n years.                            
If the interest is compounded once in a year :  
                        
A = P(1 + r)ⁿ                            

If the interest is compounded q times in a year :                        
  
A = P(1 + r/q)^nq                                                   


Formula for the amount of an annuity                                

Annuity - An annuity is a fixed sum of money which is paid at regular intervals.                                          

P = Sum deposited each year (beginning one year from when the annuity starts)

r = The interest rate, in the form of decimal e.g. 3% means r = 0.03

n = Total number of years the annuity has run.                  

N = Total amount accumulated after the end of n years.                                              

N = (P/r) ( (1 + r)ⁿ - 1)                                                    

So if 20000 rupees is deposited yearly for 20 years at 6%,                                              

N = (20000/0.06) ( (1 + 0.06)²⁰ -1) = 735711.8233 rupees