AMDM - Unit 7 Test

Front

What is the future value of an annuity formula?

Back

The future value of an annuity formula is FV = P * [(1 + r)^nt - 1] / r, where P is the payment amount, r is the interest rate per period, n is the number of times that payment is made per year, and t is the number of years.

Front

How do you calculate monthly take-home pay?

Back

To calculate monthly take-home pay, subtract all deductions (taxes, insurance, retirement savings) from gross monthly income.

Front

What does compounded quarterly mean?

Back

Compounded quarterly means that interest is calculated and added to the principal four times a year.

Front

What is the formula for compound interest?

Back

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

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

What is the effective annual rate (EAR)?

Back

The effective annual rate (EAR) is the interest rate on an investment or loan that is compounded over a year, taking into account the effect of compounding.

Front

What is the significance of the term 'semi-annually'?

Back

Semi-annually means that an event occurs twice a year.

Front

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

Back

To calculate the total amount paid on a loan with interest, sum the principal amount and the total interest paid over the life of the loan.

Front

What is the formula for calculating retirement savings?

Back

The formula for calculating retirement savings is FV = P * [(1 + r)^nt - 1] / r, where FV is the future value, P is the monthly contribution, r is the monthly interest rate, n is the number of contributions per year, and t is the number of years.

Front

What is the purpose of health insurance deductions from paychecks?

Back

Health insurance deductions are taken from paychecks to cover the cost of health insurance premiums, providing financial protection against medical expenses.