12 Questions
What is simple interest?
Interest paid on loans calculated using the principal only
Which formula is used to calculate simple interest?
I = PRT
What is the future value (FV) of an asset?
Value of an asset at a future date based on growth rate assumptions
What does the Future Value Interest Factor (FVIF) calculate?
Compound returns required for a sum to reach a specific level in the future
In which type of annuity are payments made at the end of the year?
Ordinary annuity
For what type of annuity are payments made at the beginning of each year?
Annuity due
What are the components of return mentioned in the text?
Interest payments and capital gains
In the context of investments, what does 'total return' represent?
The combination of current income and capital gain (loss) over a specified period
Why is historical performance important in understanding investments?
To provide a meaningful basis for future expectations
What does 'expected return' refer to in the context of investments?
The return an investor expects an investment to earn in the future
What factors contribute to the internal level of return in an investment?
Quality of management and type of investment vehicle
What is meant by 'external level of return' in investments?
Factors outside the direct control of the investment
Learn about the components that make up the level of profit in an investment, including current income (interest payments, dividends, distributions) and capital gains or losses. Explore how total return is calculated by combining current income and capital gains (or losses).
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