Business, 19.06.2020 19:57 kaylaunderwood470

With all time value of money problems there are three basic factors: 1) timing of cash flows; 2) Size of Cash flows; 3) Risk of cash flows. Note the timing is associated with 'n' or number of periods; size is associated with PV, FV or Pmt (payment) and risk is associated with the interest rate. With any particular problem you might be asked to solve for PV, FV, PMT, N or I. Therefore part of a good problem solving strategy is attempting to identify these variables when you read a problem. Note sometimes not all of the variables are given. You may need to assume a variables value (which might be zero or other value based on the context of the question). In the question below you are asked to compute payment, this is a common question in finance when you are computing the required payments on a loan. If a 10-year ordinary annuity has a present value of $8,225, and if the interest rate is 5 percent, what is the amount of each annuity payment?

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