Understanding Annuity and Loan Formulas

This video tutorial explains how to solve for time in annuity and loan formulas using common logarithms. It covers the variables involved in the annuity formula, provides a detailed example of solving an annuity problem, and demonstrates the use of logarithms to solve equations. The tutorial concludes with setting up a loan formula example, highlighting the similarities in solving both annuity and loan problems.

What is the primary mathematical tool used to solve for time in annuity and loan formulas?

• Algebra

• Trigonometry

• Common Logarithms

• Calculus

In the annuity formula, what does the variable 'D' represent?

• The balance in the account

• The regular deposit amount

• The annual interest rate

• The number of compounding periods

If the interest rate is 3.5% compounded monthly, what is the value of 'K' in the annuity formula?

• 12

• 3.5

• 0.035

• 1

Why do we use logarithms to solve the annuity equation for time?

• Because the time variable is in the exponent

• Because the equation is linear

• Because it simplifies the interest rate

• Because it eliminates fractions

What is the approximate time it takes for the account to grow to $12,000 in the given example?

• 6.0 years

• 5.2 years

• 4.6 years

• 3.5 years

What is the main difference between solving an annuity problem and a loan problem?

• The use of different logarithms

• The type of interest rate used

• The structure of the equation

• The need for a calculator

In the loan formula example, what is the principal amount?

• $14

• $75

• $200

• $799

What is the monthly payment in the loan formula example?

• $14

• $75

• $200

• $799

How is the interest rate expressed in the loan formula example?

• As a whole number

• As a fraction

• As a percentage

• As a decimal

What is the compounding frequency in the loan formula example?

• Annually

• Quarterly

• Monthly

• Daily