Unlike simple interest, which is calculated only on the principal, compound interest is calculated on the principal plus the accumulated interest of previous periods.
In math, "risk" is often expressed as . Investors use statistical tools to predict the likelihood of an investment's return: Investment Mathematics
A complex mathematical equation used to determine the fair price of stock options, incorporating time, volatility, and interest rates. 5. Portfolio Theory Unlike simple interest, which is calculated only on
Investment mathematics—often called —is the engine under the hood of the global economy. At its core, it is the study of how money changes value over time and how to quantify the relationship between risk and reward. 1. The Time Value of Money (TVM) 4. Valuation Models
How do experts know what a company or a bond is actually worth? They use mathematical models to "discount" future earnings back to the present.
Measures how much an investment's return fluctuates around its average. A high standard deviation means higher risk.
Measures a specific stock's volatility relative to the broader market. 4. Valuation Models