Time value of money Principals

Question 1

When calculating time value, what does N (n) signify?

Answer 1

The number of compounding periods.

Question 2

When calculating time value, what does I/YR (i) signify?

Answer 2

The interest rate per year

Question 3

When calculating time value what does PV signify?

Answer 3

Present value, also known as the beginning value

Question 4

When calculating time value what does PMT signify?

Answer 4

The amount of the payment

Question 5

When calculating time value, what does FV signify?

Answer 5

This is the future value, also known as the ending value

Question 6

What is an annuity?

Answer 6

Series of equal payments

Question 7

What is the future sum of an annuity?

Answer 7

Accumulation of funds to meet a financial goal

Question 8

What is an annuity due?

Answer 8

Payments made at the beginning of the year.

Question 9

What is an ordinary annuity

Answer 9

Payments made at the end of the year.

Question 10

What is amortization?

Answer 10

Process of allocating a loan payment into principal and interest components.

Question 11

Explain how to calculate capital preservation

Answer 11

This is used to determine the amount needed to provide a specific income amount using only interest, therefore, preserving the original capital investment.
This is calculated by dividing the desired income amount by the interest rate.