Financial Math

Question 1

What formula uses no compounding periods?

Answer 1

Simple Interest formula, it only needs the time, ‘t’ in years

Question 2

Does simple interest find the full value, just the interest, or just the Principle amount?

Answer 2

Just the Interest. to find the total, add the principal value to the interest.

Question 3

What does P stand for?

Answer 3

Principal, original amount invested or borrowed.

Question 4

What does r stand for?

Answer 4

It is the interest rate, expressed as a decimal. (Ex. 23.5% as r is 0.235)

Question 5

What does t stand for?

Answer 5

time, ALWAYS in years.

Question 6

What does A stand for?

Answer 6

The amount at the end of the time of an investment loan.

Question 7

What does i stand for?

Answer 7

interest rate, per number of compounding periods

Question 8

What does n stand for?

Answer 8

Number of compounding periods over the full length of time.

Question 9

What does N stand for?

Answer 9

Number of compounding periods, per year.

Question 10

How do you solve for i?

Answer 10

r
—
N

Question 11

How do you solve for n?

Answer 11

tN

Question 12

What is Present Value and what does it look like in an equation?

Answer 12

Present Value is PV in an equation and it is the amount needed to be invested or borrowed to reach a certain goal of the A value.

Question 13

What is Future Value Annuity? How is it represented in an equation?

Answer 13

Future Value Annuity is represented in an equation as the A value. It is used when adding more money during every compounding period.

Question 14

What is simple interest? What does it look like in an equation?

Answer 14

Simple interest is the I value in an equation. It is when you invest/borrow money ONCE and earns interest per year.

Question 15

What is compound interest?

Answer 15

An interest being reinvested at regular intervals.