Fall 2024 - AFA Final Exam Review

Front

What is the formula to calculate the interest accrued on a loan during a non-payment period?

Back

Interest = Principal × Rate × Time

Front

How do you calculate the total amount owed on a loan after a certain period with interest?

Back

Total Amount = Principal + Interest

Front

What is the difference between subsidized and unsubsidized student loans?

Back

Subsidized loans do not accrue interest while the borrower is in school, while unsubsidized loans do.

Front

What is the formula for calculating the future value of an investment compounded continuously?

Back

Future Value = Principal × e^(Rate × Time) where e is the base of the natural logarithm.

Front

How do you determine the monthly payment for a loan?

Back

Monthly Payment = (Principal × Rate) / (1 - (1 + Rate)^-n) where n is the number of payments.

Front

What is the effective interest rate for a loan compounded annually?

Back

Effective Interest Rate = (1 + nominal rate / n)^n - 1 where n is the number of compounding periods per year.

Front

What is the formula for calculating the balance of an account with compound interest?

Back

Balance = Principal × (1 + Rate/n)^(n × Time) where n is the number of times interest is compounded per year.

Front

How do you calculate the tax owed based on taxable income?

Back

Tax Owed = Tax Rate × Taxable Income, where tax rates vary based on income brackets.

Front

What is the significance of the loan term in determining monthly payments?

Back

Longer loan terms generally result in lower monthly payments but higher total interest paid.

Front

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

Back

Present Value = Future Value / (1 + Rate)^Time