101-5 TVM & Calculations - Part 1

Question 1

Annuity

Answer 1

Equal and regular payments in a series of savings deposits or payments (in time value of money language)

Question 2

Future value of an annuity

Answer 2

The accumulation of funds to meet a future financial goal

Question 3

Annuity due

Answer 3

If each of the payments is made @ the beginning of each period (e.g. lease payments)

Question 4

Ordinary annuity

Answer 4

If each of these payments is made @ the end of each period (e.g. mortgage payments)

Question 5

Serial payments

Answer 5

Commonly means that a payment increases each year by the amount of inflation (to maintain a consistent or real dollar amount)

Question 6

Rule of 72 shortcut

Answer 6

Used to determine the # of years it will take for a single amount to double in value or, alternatively, the interest rate that is required for an investment to double within a specific # of years

Divide 72 by the annual interest rate