CAA Financial Mathematics

Question 1

What is the formula for compound interest?

Accepted Answer

A = P(1 + r/n)^(nt)

Answer

A = P(1 + rt)

Answer

A = P(1 - r)^t

Answer

A = P(rt)

Question 2

What is the present value of an annuity?

Accepted Answer

The sum of discounted future cash flows

Answer

The future value of payments

Answer

The total number of payments made

Answer

The interest rate over time

Question 3

Which of the following best describes an actuarial present value?

Accepted Answer

The expected value of future payments, discounted for time and probability

Answer

The nominal value of future payments

Answer

The total payout without discounting

Answer

The current interest rate

Question 4

What does the time value of money principle state?

Accepted Answer

A dollar today is worth more than a dollar in the future

Answer

Money has no value over time

Answer

Interest rates have no impact on value

Answer

Only inflation affects money’s value

Question 5

Which type of interest grows exponentially over time?

Accepted Answer

Compound interest

Answer

Simple interest

Answer

Fixed interest

Answer

Linear interest

Question 6

What does an amortization schedule show?

Accepted Answer

A breakdown of loan payments over time

Answer

A summary of bank transactions

Answer

The total interest rate

Answer

The highest possible loan amount