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29 Cards in this Set
- Front
- Back
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Effective interest definition. |
Interest/discount paid once per period. |
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Nominal interest definition. |
Interest paid more frequently per period and reinvested. |
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Interest definition. |
Paid at end of period on the balance from the beginning of the period. |
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Discount definition. |
Paid at beginning of period on the balance at the end of the period. |
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"d" denotes |
Rate of discount. |
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"v" denotes |
Discount factor. |
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d= (multiplication formula) |
i*v |
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d=(additive formula) |
1-v |
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Accumulation function is denoted... |
a(t) |
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Amount function is denoted... |
A(t) |
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In = (formula) |
A(n) - A(n-1) |
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A(t) = (formula) |
k * a(t) Where k=principal amount. |
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A(0) = ? |
k (the principal amount) |
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Three conditions of the accumulation function a(t) are: |
1. a(0) = 1 2. a(t) must be increasing. 3. a(t) must be continuous. |
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a(1) = ? |
1 + i |
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i = (formula) |
a(1) - a(0) |
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in = (formula) |
(A(n) - A(n-1)) / A(n-1) = In/A(n-1) |
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d = (formula excluding v) |
i / (1+i) |
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i - d = (equivalent) |
i*d |
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v = (formula excluding d) |
1 / (1+i) |
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Simple interest accumulation function? a(t) = |
1 + (it) |
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Compound interest accumulation function? a(t) = |
(1+i)^t |
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Simple discount accumulation function? a(t) = |
1 / (1+dt) |
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Compound discount accumulation function? a(t) = |
1 / ((1-d)^t) |
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Future Value (FV) = (formula) |
PV*(1+i)^t Where PV = Present Value. |
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Present Value (PV) = (formula) |
FV / ((1+i)^t) Where FV = Future Value. |
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i(m) definition |
Nominal rate of interest payable "m" times per period. |
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d(m) definition |
Nominal rat of discount payable "m" times per period. |
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i = (nominal formula) |
[(1+ (i(m)/m)^m] -1 |
