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### 15 Cards in this Set

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