TVM part 2 Flashcards
1
Q
What is the EAR
A
its the total amount of intrest earned at the end of 1 year
2
Q
Do we adjust the EAR based on different periods
A
YES
3
Q
What function do we use to find period payments?
A
PMT
4
Q
What is APR
A
its the amount of intrest earned throughtout the year without the effect of compunding
5
Q
is APR a discount rate
A
NOOOO you can convert it :)
6
Q
How do you convert APR to its interest?
A
r = APR/ compounding periods per year
7
Q
How do you understand mortgage payments
A
Mortgage payments are made equally over time and the interest, so noting is paid at the end so its zero
8
Q
what about for like payments made how do we use NPV?
A
payment made in year 1 + npv()
