Mathematics: Present Value vs Future Value Annuities

Practice vocabulary flashcards distinguishing between Future Value Annuities (FVA) and Present Value Annuities (PVA), including definitions, payment types, scenario classifications, and practice problems.

FVA / FVIFA

Future Value Annuity / Future Value Interest Factor of Annuity; used for saving money toward a future goal, where PMT represents the periodic deposit amount.

PVA / PVIFA

Present Value Annuity / Present Value Interest Factor of Annuity; used for borrowing money and calculating loan amounts, where PMT represents the periodic repayment amount.

PMT (in FVA)

The periodic deposit amount contributed regularly toward achieving an accumulated future goal.

PMT (in PVA)

The periodic repayment amount paid regularly to pay off borrowed money or a loan.

Vehicle Loan

A form of borrowed money that is classified under Present Value Annuity ($\text{PVA}$) because it is paid back through periodic repayments.

Bond for a House

A large loan taken out to finance property, categorized under Present Value Annuity ($\text{PVA}$) due to ongoing repayments on borrowed funds.

Retirement Savings Goal

A target lump sum wanted at retirement, categorized under Future Value Annuity ($\text{FVA}$) because it involves accumulating savings over time.

Mandla's Car Loan Problem

A Present Value Annuity problem where Mandla borrows $R\,120\,000$ for a car and repays it in equal monthly installments over $5$ years at an interest rate of $12\%$ per annum.

Zanele's Savings Problem

A Future Value Annuity problem where Zanele aims to save $R\,50\,000$ over a duration of $4$ years by depositing equal monthly amounts into an account earning $6\%$ per annum.

Naledi's Car Savings Problem

A Future Value Annuity problem where Naledi plans to buy a car in $3$ years by making equal monthly deposits into an interest-bearing account.