Finance & Investment Math

Understanding the math behind wealth growth

📈 The Power of Compound Interest

Compound interest is one of the most powerful financial concepts. It determines how investments grow over time. The formula is:

A = P(1 + r/n)^(nt)

Where:

• A = Future value of investment
• P = Principal amount
• r = Annual interest rate
• n = Number of times interest is compounded per year
• t = Number of years

💹 Return on Investment (ROI)

ROI measures how profitable an investment is:

ROI (%) = [(Final Value - Initial Cost) / Initial Cost] × 100

For example, if you invested $5,000 in a stock and after a year it’s worth $6,000, your ROI would be:

(6000 - 5000) / 5000 × 100 = 20%

📊 Risk Management in Investments

Risk management is essential for investors. The standard deviation formula helps measure risk:

σ = sqrt( Σ (xi - μ)² / N )

💲 Net Present Value (NPV)

NPV helps determine the value of an investment by discounting future cash flows:

NPV = Σ [ Ct / (1 + r)^t ] - C0

📊 Key Financial Ratios

Understanding financial ratios is crucial for investment decisions. Some important ones include:

• Price-to-Earnings (P/E) Ratio: Measures stock valuation.
• Debt-to-Equity (D/E) Ratio: Indicates financial leverage.
• Current Ratio: Evaluates liquidity.

💰 Start Applying Investment Math Today!

Understanding finance and investment math can help you make smarter financial decisions. Check out our investment calculator to see how your money can grow over time!