TVM Practice

Front

What does PV represent in the TVM Solver?

Back

PV stands for Present Value.

Front

How do you calculate the down payment for a home listed at $150,000 with a 20% down payment requirement?

Back

Down payment = 20% of $150,000 = $30,000.

Front

What is the formula to calculate the future value (FV) of an investment?

Back

FV = PV * (1 + r)^n, where r is the interest rate and n is the number of compounding periods.

Front

What does N represent in the TVM Solver?

Back

N represents the total number of compounding periods.

Front

How do you find the amount earned by an investment after a certain number of years?

Back

Use the formula FV = PV * (1 + r/n)^(nt), where r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.

Front

What is the interest rate if $1050 grows to $1291.50 in 4 years with quarterly compounding?

Back

The interest rate is 5.2%.

Front

What does the term 'compounding' mean in finance?

Back

Compounding refers to the process of earning interest on both the initial principal and the accumulated interest from previous periods.

Front

If an investment of $410,000 earns 3.85% compounded annually, what is the future value after 10 years?

Back

The future value is $598,203.38.

Front

What is the formula for calculating the present value (PV) of a future sum of money?

Back

PV = FV / (1 + r)^n, where FV is the future value, r is the interest rate, and n is the number of periods.

Front

What is the significance of the interest rate in time value of money (TVM) calculations?

Back

The interest rate reflects the opportunity cost of capital and affects the growth of investments over time.