Reference no: EM132835174

You know how the TVM concept as applies to single cash flow. However, in real life you will come across financial applications that require multiple or annuity cash flows. That is why it is important to know how to apply the TVM concept to annuity cash flows; for example, how to amortize a mortgage or car loan.

Question 1: Explain whether you would you rather have a savings account that paid interest compounded on a monthly basis or compounded on an annual basis? Why?

Question 2: Describe what an amortization schedule is and its uses. Explain the purpose of an amortization schedule.

Question 3: Interest on a home mortgage is tax deductible. Explain why interest paid in the early years of a home mortgage is more helpful in reducing taxes than interest paid in later years.

Question 4: Explain the difference between an ordinary annuity and an annuity due.