xandersnape
Member
Anyone know a way of remembering what type of questions each of the three equations in annuities apply to?
Annuities!!!! (1 Viewer)
- Thread starter xandersnape
- Start date
Practice!
Seriously though,
1. FV formula - use when question talks about stuff like what will the investment grow to after 20 years, or in 20 years time, or something like that.
2. little PV formula - it's just the reverse of the compound interest formula - use when the question says something like what single amount of money would need to be invested now so it will grow to a certain amount.
3. big PV formula - ALWAYS used for LOANS, and N is the amount of the loan - also used when the question says something like what single amount of money would need to be invested now INSTEAD of investing a certain amount each month or year or whatever.
That's about it I think.
Seriously though,
1. FV formula - use when question talks about stuff like what will the investment grow to after 20 years, or in 20 years time, or something like that.
2. little PV formula - it's just the reverse of the compound interest formula - use when the question says something like what single amount of money would need to be invested now so it will grow to a certain amount.
3. big PV formula - ALWAYS used for LOANS, and N is the amount of the loan - also used when the question says something like what single amount of money would need to be invested now INSTEAD of investing a certain amount each month or year or whatever.
That's about it I think.
Tulii
Like the sun will rise.
- Joined
- Oct 15, 2008
- Messages
- 130
- Gender
- Female
- HSC
- 2009
I used to have some trouble determining which formula went with each question.
So first, I got white labels (size of a palm card) and stuck them on my desk. I wrote the the little and big present value formula on two and the future on the last.
Then, I photo copied a bunch of annuities questions and cut them out.
and then, you have to match the questions up to the correct formula. After a while you understand it alot better and take note of key words that will help you in an exam.
So Yup.
So first, I got white labels (size of a palm card) and stuck them on my desk. I wrote the the little and big present value formula on two and the future on the last.
Then, I photo copied a bunch of annuities questions and cut them out.
and then, you have to match the questions up to the correct formula. After a while you understand it alot better and take note of key words that will help you in an exam.
So Yup.