Annuities/APR, AER & EAR

Question 1

FV of an accumulated sum of money

Answer 1

FV = PV [ (1+r)n-1) / r ]
1. (1+r)^n-1
2. Ans / r
3. Ans x PV

Question 2

Annuities

Answer 2

A = P [1 - (1+r)-n / r ]
1. 1 – (1+r)^-n
2. Ans / r
3. Ans x P

Question 3

Mortgages

Answer 3

M = P [1 - (1 + r)-n / r]
1. 1 – (1 + r) ^-n
2. Ans / r
3. Ans x P

Question 4

Mortgages (Working out P)

Answer 4

P x 11.14694586 = £100,000
Move the11.14694586 to the other side of the equals sign and change the multiplication to a division.
M / Ans = P
Total payments ox Ans = Total payable over term

Question 5

APR, AER & EAR

Answer 5

APR = AER = EAR = all can all be found using the same formulae:
(1+ r/n)n– 1

Question 6

APR, AER & EAR (Calculating annual rate)

Answer 6

APR = (1 + monthly rate)12 -1

Question 7

APR, AER & EAR (Calculating monthly rate)

Answer 7

Monthly rate = 12√(1+APR) - 1