That's ok, the only way you learn those things that "everybody knows" is to ask everybody!

The 700 did indeed appear as a modernization of the venerable 240 platform. Shared almost all drivetrain mechanicals when it appeared in 1983. The suspension and body was all new however. The 240 got an update in 1986 (for our market) that brought the cars more into the modern age. The 740 had to wait until 1990 for it's facelift.
The 940 appeared in 1991, with really very few changes to the 7 series wagon. The 940 sedan however was a different car entirely behind the rear doors. The trunk lid was raised up and the rear restyled. Mechanically, again, few changes. ABS brakes became standard, as did a passenger side airbag after a couple years.
The 960 appeared in 1992 and took over from the 760 and 940SE lines- these cars at first appear very similar to a 740 but have many body differences, particularly front cowl, grille, hood and lights. This whole line used self-leveling rear suspension and also had IRS on sedans, and 95+ wagons. The B6304 2.9l 6cyl is unique to the 960 model. The turbo-4s of earlier years were shared with the 740Turbo.
The 850s appeared just as the 240 was being retired, and the end was in sight for the US version of the 940. This was a whole different new car, and shares few pieces with the others. For one thing, it's front wheel drive, and the transverse engine is a 5-cylinder unique to that model (and the S/C/V70 that followed in 1998). Visually however, you're exactly right: the rear of an 850 sedan is VERY similar to a 940, and in cases where I couldn't see a badge or it was missing, I've mistaken one for the other. In reality the 850 is much shorter, lower, and wider than the 9 series.
Hope that helps a bit with the history. A great resource you would enjoy is the book: "Volvo: the First Forty Years" covering 1955 to 1995.
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Rob Bareiss, New London CT ::: '87 244DL/M47- 230K, 88 744GLE- 220K, 82 245T-181K Also responsible for the care and feeding of: 88 745GLE, 231K, 87 244DL, 239K, 94 855GLT 189K