AGLS EXAM 1 Review - Financial planning & TVM - Part 3

Question 1

What is the cost of a venti Carmel Frappuccino at Starbucks?

Answer 1

$5.14

Question 2

What is combat inflation?

Answer 2

Interest (bank deposits) and return (investments)

Question 3

What is the time value of money?

Answer 3

A dollar saved today is worth more than a dollar saved in the future
because you can start accruing interest now.

Question 4

What is simple interest?

Answer 4

Interested paid or computed on the original principle only of a loan or on the amount of an account.

Question 5

Simple Interest Formula

Answer 5

FV=PV(1+i*n)

Question 6

What does the variables mean in simple interest?

Answer 6

Pv - dollar amount invested or present value
N - years invested
I- annual interest rate
Fv - future value of the investment

Question 7

What is Compound interest?

Answer 7

Interest paid on interest, resulting from the reinvestment of interest paid on an investment’s principle.
Compounding may be annually, quarterly, monthly, daily, etc.

Question 8

Shorter compounding periods causes your money (and debts) to?

Answer 8

Grow faster

Question 9

What’s more common compound interest or simple interest

Answer 9

Compound interest

Question 10

annual compounding formula

Answer 10

FV=pv(1+i)*n

Question 11

Monthly compounding formula

Answer 11

FV=pv(1+1/2)n*12

Question 12

What is compound Annuity?

Answer 12

depositing an equal sum of money at the end of each year for a certain number of years and allowing it to grow

Question 13

Compound annuity formula

Answer 13

FV=PMT[((1+i/12)n*12-1)/(i/12))]

Question 14

Bad compounding saying

Answer 14

Compound interest is the eighth wonder of the world. He who understands it, earns it.. he who doesn’t pays it

Question 15

How much does the Average American pay in interest over a lifetime?

Answer 15

$280,000

Question 16

Installment loans

Answer 16

1. Approved for a specific $ amount
2. Due in full by a specific due date
3. Required monthly payment amount

Question 17

amortization schedule

Answer 17

shows how loan payments are being applied to principal and interest
- interest only accrues on unpaid principle

Question 18

Financial goals

Answer 18

1. Transfer your goals
2. Input the PV, FV, n, and i
   3, calculate monthly PMT

Question 19

Can’t afford the monthly payments required to meet your goals, you can

Answer 19

1. Adjust your goals
2. Change your timeline
3. Earn a greater rate of return