Simple interest/compound interest

Hi there,

Yes, you need to know the formulas for the growth rate (out of which, interest is a particular application):

• Simple growth rate ⮕ May be present in the calculation of the market size after one year, following the market growth
• Compound growth rate ⮕ May be present in Net Present Value or estimate of multiple years of growth for a variable at the same rate

Best,

Francesco

I don't think anyone would expect you to have any formulas (though I do appreciate your adherence to proper latinate plurals!) memorized in a case interview. I think people would expect you to understand how compounding works--particularly in cases of revenue growth or market growth (e.g., if sales are $100 in year 0 and grow 10% what are they in year 1? $110! What if they grow 10% again? What are they in year 2? $121!). Hope this helps!

I'd focus on internalizing concepts rather than memorizing formulas. Although the breakeven formula may be helpful to have in your pocket if the concept is eluding you.

Andrew

At minimum you need to know these concepts very well. Then come the formula. Simply memorising these formulae will do you no good.

Most case interviews will not involve taking the 15th power of (1 + 0.09) - or whatever. However, they will involve practical application of these concepts and formulae. Things like NPV, rule of 72, etc.

Unlikely you will have to calculate compound interest in a question. I would definitely know the concepts well and be able to explain it but not worry about memorizing compound interest formula.

Hi, I confirm you should be able to manipulate these calculations and the main insights behind them

Best,
Antonello

Doesn't hurt but I wouldn't say it's expected.

Yes! 

Hi there,

You need to know how to calcualte NPV into perpituity. You also need to be able to calculate NPV for year 1, 2, and sometimes year 3. You also need to be able to calculate a # in 1 to 2 years based on a CAGR or growth rate.