College Math Unit 6 Final Exam Review

Front

What is the formula to calculate the future value of an annuity?

Back

Future Value = P * [(1 + r)^nt - 1] / r, where P = payment per period, r = interest rate per period, n = number of compounding periods per year, t = number of years.

Front

How do you calculate the present value needed to withdraw a fixed amount monthly during retirement?

Back

Present Value = PMT * [(1 - (1 + r)^-nt) / r], where PMT = monthly withdrawal, r = monthly interest rate, n = number of compounding periods per year, t = number of years.

Front

What is the effective monthly interest rate if the annual nominal rate is 8%?

Back

Effective monthly interest rate = Annual rate / 12 = 8% / 12 = 0.6667%.

Front

How do you determine the total interest earned on an investment?

Back

Total Interest = Final Amount - Total Contributions.

Front

What is the formula for calculating monthly mortgage payments?

Back

M = P[r(1 + r)^n] / [(1 + r)^n - 1], where M = monthly payment, P = loan principal, r = monthly interest rate, n = number of payments.

Front

What is the impact of compounding frequency on the future value of an investment?

Back

More frequent compounding results in a higher future value due to interest being calculated on previously earned interest.

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 plus any interest earned.

Front

How do you calculate the down payment on a home purchase?

Back

Down Payment = Purchase Price * Down Payment Percentage.

Front

What is the significance of the time value of money in financial planning?

Back

The time value of money states that a dollar today is worth more than a dollar in the future due to its potential earning capacity.

Front

How do you calculate the total cost of a loan?

Back

Total Cost = Total Payments - Loan Amount.