Associate Safety Professional Practice Exam

In the formula used to calculate the present value of an annuity, what variable represents the number of periods?

1. A

2. F

3. N

4. I

The correct answer is: N

In the context of calculating the present value of an annuity, the variable that represents the number of periods is indeed denoted by "N." This variable indicates how many times a payment will be made over the duration of the annuity. When utilizing the present value formula, the number of periods is crucial since it matters how long the payments will be received or how often the corresponding interest is applied. This contributes substantially to the determination of the present value, as it considers both the frequency and the duration of critical cash flows. The other variables serve different purposes in the calculation. For instance, "A" typically represents the payment amount per period, "F" can indicate the future value of the cash flows, and "I" refers to the interest rate per period. Understanding these differences helps in accurately applying financial formulas and ensures precise calculations are made for investments and financial planning.