AMDM - Unit 7 Test

Front

What is the formula for compound interest?

Back

A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest. P is the principal amount (the initial amount of money), r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the number of years the money is invested or borrowed.

Front

What does 'semi-annually' mean?

Back

Semi-annually means occurring twice a year.

Front

How do you calculate monthly payments on a loan?

Back

Use the formula M = P[r(1 + r)^n] / [(1 + r)^n – 1], where M is the total monthly mortgage payment, P is the principal loan amount, r is the monthly interest rate, and n is the number of payments.

Front

What is the effective interest rate for an investment compounded quarterly?

Back

The effective interest rate can be calculated using the formula: (1 + r/n)^(nt) - 1, where r is the nominal interest rate, n is the number of compounding periods per year, and t is the number of years.

Front

What is the total cost of an item after tax?

Back

Total Cost = Price + (Price * Tax Rate). For example, if an item costs $100 and the tax rate is 6.8%, the total cost would be $100 + ($100 * 0.068) = $106.80.

Front

What is the formula for calculating take-home pay?

Back

Take-home pay = Gross Income - (Taxes + Deductions). Gross income is the total earnings before any deductions.

Front

What is the difference between simple interest and compound interest?

Back

Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal and also on the accumulated interest from previous periods.

Front

How do you calculate the total amount paid on a loan?

Back

Total Amount Paid = Monthly Payment * Number of Payments. For example, if the monthly payment is $366.35 for 60 months, the total amount paid would be $366.35 * 60.

Front

What is the significance of a down payment in a loan?

Back

A down payment reduces the amount of the loan needed and can affect the interest rate and monthly payments.

Front

What is the formula for calculating the total amount paid for an item on credit?

Back

Total Amount Paid = Principal + Interest. Interest can be calculated using the formula: Interest = Principal * Rate * Time.