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Questions and Answers

Two annual rates with different conversion period that will earn the same maturity value for the same time/term.

Equivalent Rate

Rate when compounded annually will give the same compound each year with the nominal rate; denoted by 1^i

Effective Rate

Annual interest rate

Nominal Rate

Payments by installment are done periodically and in equal amounts

<p>Annuity</p> Signup and view all the answers

the time between successive payments

<p>payment interval</p> Signup and view all the answers

sequence of payments made at equal/fixed intervals or periods of time

<p>annuity</p> Signup and view all the answers

annuity where the payment interval is the same as the interest periods

<p>simple annuity</p> Signup and view all the answers

annuity where the payment interval is not the same as the interest period

<p>general annuity</p> Signup and view all the answers

type of annuity in which the payments are made at the end of each payment interval; also known as "Annuity Immediate"

<p>ordinary annuity</p> Signup and view all the answers

annuity in which payments begin and end at definite times

<p>annuity certain</p> Signup and view all the answers

type of annuity in which the payments are made at the beginning of each payment intervals

<p>annuity due</p> Signup and view all the answers

annuity in which the payments are extend over an indefinite lenght of time

<p>contingent annuity</p> Signup and view all the answers

time between the first payment interval and last payment interval

<p>term of annuity</p> Signup and view all the answers

amount of each payment

<p>regular</p> Signup and view all the answers

sum of the future value of all the payments to be made during the entire term of annuity

<p>future value of an annuity</p> Signup and view all the answers

sum of the present values of all the payments to be made during the entire term of annuity

<p>present value of an annuity</p> Signup and view all the answers

refers to the time between successive period of annuity

<p>payment period</p> Signup and view all the answers

the size of each annuity payment

<p>periodic payment</p> Signup and view all the answers

annuity that does not begin until a given time interval has passed

<p>deferred annuity</p> Signup and view all the answers

time between the purchase of an annuity and the start of the payment for the deferred annuity

<p>period of referral</p> Signup and view all the answers

invests money or make funds available

<p>Lender</p> Signup and view all the answers

owes the money or avail funds from the lender

<p>borrower</p> Signup and view all the answers

date in which the money is received by the borrower

<p>origin date</p> Signup and view all the answers

date on which the money borrowed is to be completely repaid

<p>maturity date</p> Signup and view all the answers

amount of time in years the money is borrowed or invested, length of time between the origin and maturity

<p>time</p> Signup and view all the answers

amount of money borrowed or invested on the origin date

<p>principal</p> Signup and view all the answers

annual rate, usually in percent, charged by the lender

<p>rate</p> Signup and view all the answers

amount paid or earned for the use of money

<p>interest</p> Signup and view all the answers

interest that is computed on the principal and then added to it

<p>simple interest</p> Signup and view all the answers

interest is computed on the principal and also on the accumulated past interest

<p>compound interest</p> Signup and view all the answers

amount after t years that the lender receives from the borrower on the maturity date

<p>maturity value</p> Signup and view all the answers

time between successive conversions of interest

<p>conversion or interest period</p> Signup and view all the answers

number of conversion periods in one year

<p>frequency of conversion</p> Signup and view all the answers

Flashcards

Equivalent Rate

Two annual rates with different conversion periods that yield the same maturity value for the same time/term.

Effective Rate

The annual rate when compounded annually that gives the same compound interest each year as the nominal rate.

Nominal Rate

The annual interest rate.

Annuity

Installment payments made periodically in equal amounts.

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Payment Interval

The time between successive payments.

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Simple Annuity

Annuity where the payment interval is the same as the interest periods.

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General Annuity

Annuity where the payment interval is not the same as the interest period.

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Ordinary Annuity

An annuity where payments are made at the end of each payment interval.

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Annuity Due

An annuity where payments are made at the beginning of each payment interval.

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Annuity Certain

Annuity with payments beginning and ending at defined times.

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Contingent Annuity

Annuity with payments that extend over an indefinite length of time.

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Term of Annuity

The time between the first and last payment interval.

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Regular (payment)

The amount of each payment.

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Future Value of an Annuity

The sum of the future values of all annuity payments during the term.

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Present Value of an Annuity

The sum of the present values of all annuity payments during the term.

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Payment Period

The time between successive annuity payments.

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Periodic Payment

The size of each annuity payment.

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Deferred Annuity

An annuity that doesn't begin until a given time interval has passed.

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Period of Referral

The time between the purchase of a deferred annuity and the start of payments.

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Lender

Invests money or makes funds available.

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Borrower

Owes money or avails funds from the lender.

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Origin Date

The date the borrowed money is received.

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Maturity Date

The date the borrowed money is to be repaid completely.

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Time (in loan/investment)

The length of time between the origin and maturity dates, measured in years.

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Principal

The initial amount of money borrowed or invested on the origin date.

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Rate

The annual rate, usually in percent, charged by the lender.

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Interest

The amount paid or earned for the use of money.

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Simple Interest

Interest computed on the principal and added to it.

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Compound Interest

Interest computed on the principal and on accumulated past interest.

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Maturity Value

The amount the lender receives from the borrower at the maturity date, after t years.

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Conversion/Interest Period

The time between successive conversions of interest.

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Frequency of Conversion

The number of conversion periods in one year.

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