Memorizing Math Formulas
July 16, 2007 9:05 AM   Subscribe

Any tips or tricks to memorizing financial math formulas

...specifically ordinary and simple annuity due, perpetuities and present value/future compoundings? Or answer it this way: how do I kill on this upcoming math test?

Thanks!
posted by JaySunSee to Education (11 answers total) 1 user marked this as a favorite
 
You'll never have to memorize these again, though it is good to understand how they work and what they do (which is rather simple). You're taking in a graphing calculator, right? One of those TI-83 types? There's a setting that lets you save programs to the "system" or something similar, which allows it to retain things if the teacher gets cute and erases it all.
posted by geoff. at 9:48 AM on July 16, 2007


If my guess is correct, it's a no-calculator exam?

The best way to memorize this stuff is to understand the underlying concepts.

I know that may not be possible for a number of reasons, so: it helps to write the formulas on a sheet of paper, front and back. And then use it on three problems. That usually did it for me.
posted by theiconoclast31 at 9:55 AM on July 16, 2007


Homework problems. You need to practice using the formulas. Do these problems without looking at the formula unless you have to.

It doesn't hurt to understand the meaning of each expression in the formula, or how to derive the formula either, but for a short timed test that's probably not good enough. The easiest way to have instant recollection of a formula is to have recently solved the same problem with different numbers.
posted by cotterpin at 10:02 AM on July 16, 2007


I think you're all "right on the money" yuk, yuk.

I was looking for some cool brain hack or something, but alas.
posted by JaySunSee at 10:49 AM on July 16, 2007


iconoclast has it, geoff does not. You need to work through problems enough to figure out for yourself where the formulas come from. Don't cheat.
posted by monkeymadness at 1:52 PM on July 16, 2007


I've found flashcards useful while memorizing formulae and algorithms.

Read a card, practise the formula, repeat till memorized. Move on to the next card. Then repeat the process after half an hour. Then repeat again the next morning.

Working with the way the brain learns (short-term memory -> medium term memory -> long-term memory) seems to do well for me.
posted by anadem at 2:04 PM on July 16, 2007


I majored in finance & had to do this all the time.
I would write all the formulas on paper, then for a week before the exam would attempt to write out each formula at a time & then check it. Do this once or twice a day, it gets so you can remember how the formula looks on paper. Of course you will forget them soon after the exam.
posted by canoehead at 6:21 PM on July 16, 2007


geoff, TI-83's have functions for calculating these things built in, so it's unlikely the teacher would allow them if the point was to know the formulas.

On the test, if you aren't sure of a formula (but think you have it), try it out on a simpler problem (make one up if you need to) that you can do the long way, quickly. Like, test out your formula for NPV of an annuity on a two-year annuity and see if the answers match.
posted by Many bubbles at 7:01 PM on July 16, 2007


Yeah, the way to do this is to write down the formulas. Over and over. Understanding them helps too, but if you have to memorize, just copy them a lot.
posted by number9dream at 8:54 PM on July 16, 2007


A better way than writing down and memorizing formulas is realizing that annuities, perpetuities, pres and future value are all special cases of a single general formula. for specific cicumsstances, some of the terms or variables are zero, resulting in the formulas you are memorizing for the specific cases.

See Annuity and Time Value of Money.

Understanding the time value of money will serve you very well throughout life. It is a very powerful tool.
posted by Pastabagel at 9:40 PM on July 16, 2007


Thanks to everyone, and I've applied several of the techniques described.
posted by JaySunSee at 6:04 PM on July 17, 2007


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