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36 Cards in this Set
- Front
- Back
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Lender |
person (or institution) who invests the money or makes the funds available |
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Borrower/debtor |
person (or institution) who owes the money from the lender |
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Origin/loan date |
date on which money is received by the borrower |
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Repayment/maturity date |
a date on which the loan is to be completely repaid |
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Term/t |
amount of time in years the money is borrowed or invested o length of time between the origin & maturity dates |
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Principal (p) |
amount of money borrowed or invested one the origin date |
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Rate (r) |
rate of increase of the investment |
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Interest (I) |
amount paid or earned for the use of money |
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Simple Interest |
interest that is computed on the principal & then added to it |
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Compound Interest |
interest is computed on the principal & also on accumulated past interests |
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Maturity/future valud |
amount that the lender receives from the borrower on maturity date |
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Nominal |
Compounded more than once |
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Effective |
Compounded once |
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Compounding period |
time interval between successive interest conversion dates |
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Nominal interest rate |
a number for the annual interest rate o words stating the compounding frequency (annually, monthly, etc.) |
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Periodic interest rate |
interest rate per compounding period |
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Simple |
Principal is constant |
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Compound |
principal increases regularly, interest also earns interest |
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Ordinary interest rate |
assumes 360 days per year (default) |
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Exact interest rate |
assumes 365 days per year |
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Actual time |
based on counting the exact number of days in a time period (default) |
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Approximate time |
based on counting 30 days in each month |
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Banker's rule |
ordinary interest in actual time (if the type of interest is not specified, use this) |
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Contingent annuities |
no fixed number of payments but depend on an uncertain time period (ex. life insurance that stop when the person insured dies) |
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Annuities certain |
payments begin and end on a fixed date (ex. mortgage payment of house, salary, installment plan) |
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Perpetuity/perpetual annuity |
the periodic payments begin on a fixed date and continue indefinitely (ex. fixed coupon payments on permanently invested sums of money) |
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Ordinary annuity |
periodic payments are scheduled at the end of each payment interval |
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Annuity due |
periodic payments are scheduled at the beginning of each payment interval |
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Deterred annuity |
first payment is scheduled to start at some later time |
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Simple annuity |
the number of compounding periods per year coincides with the number of annuity payment per year |
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General annuity |
the annuity payments and compounding periods do not coincide |
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Payment interval |
(payment period) - length of time between successive payments in an annuity |
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Term of the annuity |
total time from the beginning of the first payment to the end |
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Periodic annuity payment |
amount paid or interest earned regularly |
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Future Value in annuity |
the value of promised future payments that will grow to after a given number of periods |
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Present Value in annuity |
value of promised future payments that have been discounted to a single equivalent value today |
