Financial Mathematics Flashcards
6 cards from real CAA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Financial Mathematics flashcards as text
What is the formula for compound interest?
Answer: A = P(1 + r/n)^(nt)
The compound interest formula is A = P(1 + r/n)^(nt), where P is the principal, r is the interest rate, n is the number of times interest is compounded per year, and t is the number of years.
What is the present value of an annuity?
Answer: The sum of discounted future cash flows
The present value of an annuity is the sum of all future cash flows discounted to the present using a given interest rate.
Which of the following best describes an actuarial present value?
Answer: The expected value of future payments, discounted for time and probability
The actuarial present value represents the expected value of future cash flows, discounted for both time and probability of occurrence.
What does the time value of money principle state?
Answer: A dollar today is worth more than a dollar in the future
The time value of money principle states that a dollar today is worth more than a dollar in the future due to its potential earning capacity.
Which type of interest grows exponentially over time?
Answer: Compound interest
Compound interest grows exponentially because interest is earned on both the initial principal and the accumulated interest.
What does an amortization schedule show?
Answer: A breakdown of loan payments over time
An amortization schedule provides a detailed breakdown of loan payments over time, showing principal and interest portions.