JAIIB Formula Sheet
Ten formulas, what each one is for, and a worked example.
Most JAIIB number questions come from one paper: Accounting & Financial Management for Bankers (AFM). They test a small set of formulas again and again, mainly interest, annuities, loan instalments, depreciation and bond yields.
Here are the ten worth memorising, what each is used for, and a worked EMI example.
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The 10 Formulas
1
Formula
Simple interest
Expression
SI = P × r × t
Use it for
Interest on deposits and loans where interest isn't added back to the principal.
2
Formula
Compound interest (amount)
Expression
A = P × (1 + r/n)ⁿᵗ
Use it for
Maturity value of a deposit compounded n times a year for t years.
3
Formula
Effective annual rate
Expression
EAR = (1 + r/n)ⁿ − 1
Use it for
Comparing a quarterly-compounded rate with an annual one.
4
Formula
Present value of an annuity
Expression
PV = A × [1 − (1 + r)⁻ⁿ] ÷ r
Use it for
Value today of a fixed series of payments, such as a loan or a pension.
5
Formula
Future value of an annuity
Expression
FV = A × [(1 + r)ⁿ − 1] ÷ r
Use it for
What a recurring deposit or sinking fund grows to.
6
Formula
EMI
Expression
EMI = P × r × (1 + r)ⁿ ÷ [(1 + r)ⁿ − 1]
Use it for
Monthly instalment on a loan. Use the monthly rate and number of months.
7
Formula
Straight-line depreciation
Expression
Depreciation = (Cost − Salvage value) ÷ Useful life
Use it for
Equal yearly charge on a fixed asset.
8
Formula
Written-down value rate
Expression
Rate = 1 − (Salvage ÷ Cost)^(1/n)
Use it for
The fixed percentage that writes an asset down to its salvage value in n years.
9
Formula
Current yield
Expression
Current yield = Annual coupon ÷ Market price
Use it for
Income return on a bond at today's price.
10
Formula
Break-even point (units)
Expression
BEP = Fixed costs ÷ (Price − Variable cost per unit)
Use it for
Volume at which a business covers all its costs.
| # | Formula | Expression | Use it for |
|---|---|---|---|
| 1 | Simple interest | SI = P × r × t | Interest on deposits and loans where interest isn't added back to the principal. |
| 2 | Compound interest (amount) | A = P × (1 + r/n)ⁿᵗ | Maturity value of a deposit compounded n times a year for t years. |
| 3 | Effective annual rate | EAR = (1 + r/n)ⁿ − 1 | Comparing a quarterly-compounded rate with an annual one. |
| 4 | Present value of an annuity | PV = A × [1 − (1 + r)⁻ⁿ] ÷ r | Value today of a fixed series of payments, such as a loan or a pension. |
| 5 | Future value of an annuity | FV = A × [(1 + r)ⁿ − 1] ÷ r | What a recurring deposit or sinking fund grows to. |
| 6 | EMI | EMI = P × r × (1 + r)ⁿ ÷ [(1 + r)ⁿ − 1] | Monthly instalment on a loan. Use the monthly rate and number of months. |
| 7 | Straight-line depreciation | Depreciation = (Cost − Salvage value) ÷ Useful life | Equal yearly charge on a fixed asset. |
| 8 | Written-down value rate | Rate = 1 − (Salvage ÷ Cost)^(1/n) | The fixed percentage that writes an asset down to its salvage value in n years. |
| 9 | Current yield | Current yield = Annual coupon ÷ Market price | Income return on a bond at today's price. |
| 10 | Break-even point (units) | BEP = Fixed costs ÷ (Price − Variable cost per unit) | Volume at which a business covers all its costs. |
What the Symbols Mean
- P
- Principal: the amount deposited or borrowed.
- r
- Interest rate per period, as a decimal. For a monthly EMI, the annual rate ÷ 12.
- n, t
- n is the number of periods (or compounding times a year); t is the number of years.
- A
- In the annuity formulas, the fixed payment each period.
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Worked Example: EMI on a Home Loan
A loan of ₹5,00,000 at 9% a year, repaid monthly over 5 years.
- 1
Convert to monthly terms
r = 9% ÷ 12 = 0.75% = 0.0075 a month. n = 5 × 12 = 60 months.
- 2
Work out (1 + r)ⁿ
(1.0075)⁶⁰ ≈ 1.5657.
- 3
Apply the EMI formula
EMI = 5,00,000 × 0.0075 × 1.5657 ÷ (1.5657 − 1) ≈ ₹10,379.
Match the Period to the Rate
Most wrong answers in AFM numericals come from mixing an annual rate with monthly periods. Before you calculate, convert the rate and the number of periods to the same unit.
FAQs
Which JAIIB paper has the most formulas?expand_more
Accounting & Financial Management for Bankers (AFM). Its time value of money, depreciation and bond units are numerical.
What's the difference between SLM and WDV depreciation?expand_more
Straight-line (SLM) charges the same amount every year. Written-down value (WDV) charges a fixed percentage of the reducing balance, so the charge is highest in the first year.
Do I need to memorise annuity tables?expand_more
No. With the PV and FV of annuity formulas and a calculator you can work out any value the question needs.
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