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15 Cards in this Set
- Front
- Back
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The mathematics of finance whereby interest is earned over time by saving or investing money.
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Time Value of Money
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Value of an investment or savings amount today or at the present time.
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Present Value
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Value of savings amount or investment at a specified time in the future.
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Future Value
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Interest earned only on the principal of the initial investment.
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Simple Interest
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An arithmetic process whereby an initial value increases at a compaound interest rate over time to reach a future value.
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Compounding
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Interest earned on interest in additiona to interest earned on the principal or investment.
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Compound Interest.
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An arithmetic process whereby a future value decreases at a compound interest rate over time to reach a present value.
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Discounting
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Used to approximate the time required for an investment to double in value.
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Rule of 72
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A series of equal payments that occur over a number of time periods.
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Annuity
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Exists when equal payments occur at the end of each time period (also referred to as a deferred annuity).
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Ordinary Annuity.
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Exists when equal periodic payments occur at the beginning of each time period.
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Annuity Due
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A loan repaid in equal payments over a specified time period.
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Amortized loan
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A schedule of the breakdown of each payment between interest and principal, as well as the remaining balance after each payment.
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Loan amortization schedule
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Determined by multiplying the interest rate charged per period by the number of periods in a year.
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Annual percentage rate (APR)
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Measures the true interest rate when compounding occurs more frequently than once a year.
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Effective Annual Rate (EAR)
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