Finance Mathematics: The basics of Financial Analysis

Explore the time value of money and why a dollar today is worth more than a dollar tomorrow. Discover how inflation, opportunity cost, and risk shape future money and investments.

Explore the four main components of the time value of money—present value, future value, interest rate, and time period—and how money grows with simple or compound interest.

Explore the time value of money through loans and EMI, 8% interest, five years, and investments growing at 6% toward retirement planning and future value.

Learn simple interest: calculate on the original principal using the simple interest formula p into r into t divided by 100, and compare with compound interest for loans and investments.

Explore a simple interest case study and compute it in Excel using p*r*t/100, showing a $1,200 interest on a $10,000 loan over two years and a total of $11,200.

Explore how compounding, the time value of money, accelerates growth by earning interest on principal and prior interest. Learn the future value formula and frequency adjustments; apply to mortgages.

Discover discounting by comparing future value to its present worth using the present value formula and Excel PV function, with examples like $15,000 in 3 years at 8%.

Understand the difference between nominal and real interest rates by adjusting for inflation to measure purchasing power. Apply the approximate formula and Fisher equation with loan, investment, and wage examples.

Learn nominal versus real interest rates through a Fisher's equation case study and an Excel calculator. Compute how a 10% nominal rate with 6% inflation yields 3.77% real return.

Calculate net present value by discounting five yearly cash inflows at 10% and subtracting the $250,000 initial investment. A case study shows the Excel NPV function confirming a positive $7,568.

Compute the internal rate of return (IRR) as the rate that makes NPV zero. Compare IRR to your required rate and use IRR with NPV to evaluate projects.

Explore the internal rate of return with a pizza pop-up case in Excel, detailing cash flows and an 18.9% IRR to guide investment decisions.

Explore annuities, focusing on ordinary annuity and future value of annuity calculations, using periodic payments (PMT) and interest rate to project future and present value.

Learn to calculate present value of an annuity using p, r, n formula in the same time unit, and use Excel's PV function for a $400 monthly loan at 9%.

Calculate the present value of a five-year annuity of 15,000 per year at a 10% discount rate to decide whether to lease or buy, using the Excel PV function.

Compute the equated monthly instalment for a $20,000 loan at 9% annual interest over five years using the EMI formula and Excel PMT, yielding $415.17 per month.

Examine perpetuities, where a fixed payment continues forever, and find their present value with the formula p*100/r, illustrated by a $5,000 yearly scholarship at 4%.