ANNUITIES Question... (1 Viewer)

[cxlxoxk]

If they ask about annuities, will they say:

"Use the formula, [insert one of the annuities formulas] to solve the following question."

Cos if not, i'm gonna be screwed if an annuities question comes up in the exam. I dunno what formula to use and when, and can't differentiate between one annuities question from another, in terms of wording. Can someone help me?

 

[melmont13]

Look at it this way- if they ask you what the value is at the end of the entire period- it's future value. If they ask you how much each installment was, it's current value. I think. I usually look at the statistics given and gauge my answer from there.

 

[PC]

In most cases:
* If it's an investment you'll use Future Value to find A.
* If it's a loan that you need to repay you'll use the big present value formula to find M, the monthly payment. The amount borrowed is N, the present value.

I reckon this will work about 80% of the time.

 

[NEVAGIVEUP]

Both the future value and present value formulae are provided in the formulae sheet, but just remember if the question says:

1. 'future value' or value in so and so years; you use the annuity formula; remember that annuities are consistent contributions
2. 'lump sum' or something that alludes to the fact that a single amount is deposited; compound interest
3. 'present value' or the amount required to be deposited; present value formula

They will not provide the formula in the question

Goodluck!