# Basic Financial Mathematics

## Time Value of Money Money is considered to worth more the sooner it is obtained, or if it is available in the present.

This is because money in the present can be used and invested to generate a return while money to be expected in the future cannot be used. Time value of money is affected by both the periods of time being considered as well as the discount rate for calculating present value.

Financial mathematics could be defined as the study of the value of money in time.

This system helps you understand and use this concept. You can apply it to real life situations: Loans, Credit Card Accounts and Savings.

## Amortization Chart

Loans and savings are analyzed through tables containing detailed information of each period of the term, including period balance, dates, periodic interest, change of the period balance (called amortization on loans) and often a final row at the bottom containing the totals for each of these concepts. This system displays full amortization charts on all the sections about loans and savings. Exactly like the ones they give you at the bank!

## Disclaimer This presentation was created for educational purposes, it is under continuous review and improvement and under no means should it be considered financial advise. Its developer(s) and its publisher(s) have no intentions to provide any form of specific financial orientation regarding investments and savings to its users.

Advice about investments and savings must come only from licensed finance professionals. This is a tool to learn!

## Contents

Basics of Interest Interest
Definition: Money charged by a lender to a borrower for a loan over a given term, calculated as a fraction or portion of the loan's value.
Simple Interest Simple interest is a quick method of calculating the interest charge on a loan.

On this page you can calculate 4 variables of simple interest: Present value, Future value, interest rate and number of periods.
Go
Compound Interest Compound interest (or compounding interest) is interest calculated on the initial principal, which also includes all of the accumulated interest of previous periods of a deposit or loan. In other words, interest on interest.

On this page you can calculate 4 variables of compound interest: Present value, Future value, interest rate and number of periods.
Go

Savings Fixed Periodic Savings
Definition: Savings consisting in a fixed amount of money over a number of periods allocated every time in some investment vehicle or savings account that pays off a given interest rate.
Future Savings Calculation of the total value that will be accumulated when saving a known fixed amount, given the periodic interest rate and the number of periods. Go
Monthly Savings to Achieve a Saving Goal Calculation of the amount you must save for a given number of periods at a fixed interest rate to reach a savings goal. Go
Number of Periods Calculation of the number of periods necessary to reach a savings goal, given the periodic savings and the interest rate. Go

Savings with Variable Deposits
Definition: Savings can be designed to be accumulated through variable periodic deposits. The variation can be positive or negative (deposits can increase or decrease). The variation can be arithmetic, also called linear (it grows or decreases by the same amount in each period) or it can be geometric (it grows or decreases by a factor, fraction or percent, that multiplies a payment to calculate the next one).
Future Value (Periodic Deposits with Linear Variation) Calculation of the future value or total savings, as a result of making deposits that go up or down by a certain amount each period. Interest rate and number of periods are known. Go
Find the Future Value (Periodic Deposits with Geometric Variation) Calculation of the future value or total savings, as a result of making deposits that go up or down at a certain rate each period. Interest rate and number of periods are known. Go

Loans & Credit Fixed Payment Loan
Definition: Type of loan in which the interest rate charged will remain fixed for that loan's entire term, no matter what market interest rates do. This will result in your payments being the same over the entire term of the loan.
Loan Value Calculation of the present value of a loan given the fixed payment, the periodic interest rate and the number of periods. Go
Payment Value Calculation of the periodic fixed payment on a loan given its present value, the periodic interest rate and the number of periods. Go
Number of Periods Calculation of the the number of periods of a loan given its present value, the periodic interest rate and the fixed payment. Go

Loan with Variable Payments
Definition: Loans can be designed to be paid off with variable periodic payments. The variation can be positive or negative (payments can increase or decrease). The variation can be arithmetic, also called linear (it grows or decreases by the same amount in each period) or it can be geometric (it grows or decreases by a factor, fraction or percent, that multiplies a payment to calculate the next one).
Present Value (Periodic Payment with Linear Variation) Calculation of the present value of a loan, with payments that go up or down by certain amount each period. Interest rate and number of periods are known. Go
Present Value (Periodic Payment with Geometric Variation) Calculation of the present value of a loan, with payments that go up or down at certain rate each period. Interest rate and number of periods are known. Go

Loans With Deferred Payments
Definition: A loan designed to allow the borrower to start making payments at some specified time in the future. Payments are not required for certain periods.
Present Value Calculation of the present value of a loan given the fixed payment, the periodic interest rate, the number of periods and the number of periods in which there is no obligation to pay. Go
Deferred Payments Value Calculation of the fixed payment value for a loan given the number of periods, the periodic interest rate, the present value and the number of periods in which there is no obligation to pay. Go
Number of Periods Calculation of the number of periods of a loan given the fixed payment, the periodic interest rate, the present value and the number of periods in which there is no obligation to pay. Go

Perpetuity Perpetuity
Definition: It refers to a fixed periodic amount that keeps coming for an infinite number of periods. A constant stream of money with no end.
Find the Present Value, Interest Rate and Periodic Fixed Income All possible calculations for arrangements with infinite number of payments Go

By César Alejandro Guerrero For SmartGigas.com