2. Financial Mathmatics

Question 0

What does present value of an annuity mean?

Answer 0

The present value of a stream of equally sized payments

Question 1

What does present value mean?

Answer 1

The present value of an amount that will be received in the future

Question 2

What does the present value of perpetuity mean?

Answer 2

The present value of a regular stream of payments which lasts indefinitely.

Question 3

What does the future value mean?

Answer 3

The future value of an amount invested now at a given rate of interest

Question 4

What does the future value of an annuity mean?

Answer 4

The future value of a stream of interest payments at a given rate of interest.

Question 5

What is simple interest?

Answer 5

Simple interest is calculated on the original amount only and assumes that at the end of each interest period the interest is withdrawn

Question 6

What is compound interest?

Answer 6

Compound interest assumes that the interest earned is left in the account or reinvested at the same rate, so that in subsequent interest periods you are earning interest on both the principal and the interest that has been earned to date.

Question 7

What is the rule of 70?

Answer 7

An approximate measure of how long it will take for an investment to double in value. 70 is divided by the amount of interest per annum.