Core concepts
- 01₹1 today > ₹1 tomorrow — due to earning capacity, inflation, risk.
- 02Simple Interest: interest on principal only.
- 03Compound Interest: interest on principal + accumulated interest.
- 04Annuity: equal periodic payments — ordinary (end) or due (beginning).
- 05Effective rate accounts for compounding within the year.
Flowchart
Present Value <-- Discounting <-- Future Value | ^ v | Annuity FV/PV Compounded (n times/yr)
Exam-critical pointers
- ⭐Annuity due = ordinary annuity × (1 + i).
- ⭐Perpetuity PV = A / i (no time limit).
- ⭐Doubling: by Rule of 72 → years ≈ 72/r (only for CI).
- ⭐Use log tables when n is large in CI — ICAI calculators not allowed.
Make it click