Finance: Chapter 4

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"When given the annual withdrawals desired during the retirement​ period, the FVA tells us the amount we should have accumulated by the time we begin the retirement period.

False

To find the loan amount for a​ fixed-rate fully-amortized​ loan, solve for​ "PMT" in the PVA formula.

False

We can determine which​ "PMT" we're being asked to solve for by noting what the problem provides in terms of r and n.

False

Annuities are unequal cash flows that go on for a finite period of time.

False

Once you determine that you are solving for the​ "PMT" variable, the appropriate formula to use is determined by the values of ​ "r" and "n".

False

"PMT" in the PVA formula tells us the periodic mortgage payments for a​ fixed-rate fully amortized loan.

True

The principal part of a fixed mortgage loan payment can be found by multiplying the periodic interest rate by the ending balance for a given period.

False

The simple FV formula is to be used to solve for the PV of an uneven stream of cash flows.

False

To find the amount needed at the beginning of your retirement period that would enable you to make desired annual withdrawals from your​ account, you would solve for​ "PMT" in the FVA formula.

False

To find the​ "PMT" in the FVA or PVA​ formulas, we calculate the value in the bracket and then multiply it by the FVA or PVA

False

When solving for the future value of a stream of unequal cash​ flows, it is important to add together the values BEFORE applying the future value formula to determine their future value

False

With the PVA and PVP​ formulas, if the first​ "PMT" you use is for the end of period​ 8, then the formula will give you the value as of the end of period 9.

False

For​ fixed-rate fully amortized mortgage​ loans, more of the fixed payment goes towards principal as we approach the end of the loan term.

True

Given the amount needed at the beginning of the retirement​ period, the annual deposits needed during the working period can be found by solving for​ "PMT" in the FVA formula.

True

Perpetuities are like annuities that go on forever.

True

The variable​ "n" in the annuity formulas represents the numbe of​ "PMT"s.

True

We can find the amount needed to pay off a​ fixed-rate fully amortized mortgage loan at any point in time by solving for the PV of the remaining payments.

True

We've discussed 3 different multiple cash flow patterns.

True

When solving for the FV of an uneven stream of cash​ flows, the appropriate exponents go down as you go from left to right on the time line of those cash flows.

True


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