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Gr12 Mathematics: Ch 3.4 Present Value Annuities

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Gr12 Mathematics: Ch 3.4 Present Value Annuities

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Questions and Answers

What is the primary purpose of calculating the present value of an annuity?

To calculate the installment amount of a loan or debt (correct)

To determine the credit score of the borrower

To find the total amount borrowed

To determine the total interest paid over the life of the loan

What does the symbol 'x' represent in the present value of an annuity formula?

Interest rate per period

Number of periods

Present value of the loan or annuity

Payment amount per period (correct)

What is the effect of an increase in the interest rate per period on the present value of an annuity?

It increases the present value

It has no effect on the present value

It is unpredictable

It decreases the present value (correct)

What is the present value of an annuity formula used for?

To calculate the installment amount or the present value of the loan or annuity Signup and view all the answers

What would be the effect on the present value of an annuity if the number of periods were to increase?

It would increase the present value Signup and view all the answers

If the interest rate per period increases, what happens to the value of the expression (1 + i)^(-n) in the present value of an annuity formula?

It decreases Signup and view all the answers

What is the relationship between the payment amount per period (x) and the present value of the loan or annuity (P)?

P is directly proportional to x Signup and view all the answers

If the number of periods (n) increases, what happens to the value of the expression [1 - (1 + i)^(-n)]/i in the present value of an annuity formula?

It approaches 1/i Signup and view all the answers

What happens to the present value of an annuity if the payment amount per period (x) is reduced, but the interest rate per period (i) and number of periods (n) remain constant?

The present value decreases Signup and view all the answers

What is the effect of an increase in the number of periods (n) on the present value of an annuity, assuming the payment amount per period (x) and interest rate per period (i) remain constant?

The present value increases at a decreasing rate Signup and view all the answers