When Saving for future expenditures, we can add the ___ of contributions over time to see what the total will be worth at some point in time.
future value
when moving from the left to the right of a timeline, we are using
compound interest to calculate future values
level sets of frequent, consistent cash flows are called
annuities
the length of time of the annuity is very important in accumulating wealth within an annuity. what other factor Also has this effect?
interest rate for compounding
in order to discount multiple cash flows to the present, one would use
the appropriate discount rate
your credit rating and current economic conditions will determine
the interest rate that a lender will offer
when interest rates are lower, borrowers can
borrow more money
the present value of annuity payments made far into the future is
worth very little today
a perpetuity, a special form of annuity, pays cash flows
continuously forever
many people who want tp start investing for their future want to start today which implies an annuity stream that is paid at the beginning of the period. beginning-of-period cash flows are referred to as
annuities due
to compute the present or future value of an annuity due, one computes the value of an ordinary annuity and then
multiplies it by (1+i)
when computing the future value of an annuity, the higher the compound frequency
he higher the future value will be
compounding months versus annual caused the interest rate to be effectively higher, and thus the future value
grows
the simple form of annualized interest rate is called annual percentage rate (APR). the effective annual rate (EAR) is
more accurate measure of the interest paid for monthly compounding
people refinance their home mortgages when
rates fall
loan amortization schedule show
both the principle balance and interest paid per period
when you get your credit card bill, it will offer a minimum payment, which
usually only pays the accord interest and a small amount of the principal
when you get your credit card bill, if you make a payment larger than the minimum payment
you will reduce the payoff time