The document outlines key formulas in personal finance including compound interest, annuities, and compounded annual growth rate (CAGR). It provides examples for each formula, illustrating how to calculate future value based on different investment scenarios. The document serves as a practical guide for understanding investment growth over time.

1. Some Important Formula's in Personal Finance 1. Compound Interest : 2. Annuity 3. CAGR Manish Chauhan http://www.jagoinvestor.com

2. Compound Interest This formula is used to calculate future value of One time payment today after some years . Future Value = Present Value * (1 + rate)^Tenure Rate = Expected rate of Return Tenure = Number of years

3. Example 1 (Compound Interest)‏ I want to invest Rs 50,000 in a Fixed Deposit for 5 yrs at 8% rate of return . How much will be the maturity value Future Value = 50,000 * (1 + .08) ^ 5 = 73466

4. Example 2 (Compound Interest)‏ I want to invest Rs 10,000 in a mutual fund today , How much will it become after 10 yrs , considering the rate of return of 15% . Future Value = 10,000 * (1 + .15) ^ 10 = 40455

5. Annuity This formula is used to calculate the future value when we do investment on a regular basis after a fixed interval . Example - when we invest in a mutual fund per month through SIP . - When we put money in our PPF account each year . Formula Future value = Amount per installment * (1+r) * [(1+r) ^n - 1]/ r

6. Example 1 (Annuity)‏ I want to invest Rs 50,000 in a my PPF account per year for next 15 yrs , How much will it become after 15 yrs , at 8% . Future Value = 50,000 * (1.08) * (1.08 ^ 15 - 1)/.08 = 14,66,214

7. Example 2 (Annuity)‏ I want to invest Rs 1,000 in a mutual fund per month for next 10 yrs , How much will it become after 10 yrs , considering the rate of return of 12% . r = rate of return = 12/12 = 1% (per month) n = number of payments = 12 * 10 = 120 Future Value = 1,000 * (1.01) * (1.01 ^ 120 - 1)/.01 = 232339

8. CAGR : Compounded annual Growth Rate - Used to calculate the annual Return provided by an Investment . - Tool to compare investments - Opposite of Compound Interest Formula CAGR = nth root of [(Current Value / Original Investment) -1 n = tenure nth root = to the power 1/n

9. Example 1 (CAGR)‏ I Invested Rs 50,000 in a mutual fund on June 2005 , Its value after 4 yrs is Rs 1,00,000 . What is the annual returns it has provided to me ? CAGR = [(100000 /50000)^ (1/4) - 1 ] = 2 ^ .25 - 1 = .1892 = 18.92% Annual return

10. Example 2 (CAGR)‏ Which investment is Better ? Investment 1 : 50,000 invested in 2000 became 2,00,000 in 2009 Investment 2 : 10,000 invested in 2004 became 25,000 in 2008 CAGR for Investment 1 = [200000/50000]^(1/9) - 1 = 16.65 % CAGR for Investment 2 = [25000/10000] ^ (1/4) - 1 = 25.74% Hence , Investment 2 is better than Investment 1 .

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