Finance: Simple and Compound Interest
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Questions and Answers

What is the definition of a bond?

  • An investment in stocks of a corporation.
  • A loan provided to an organization like the government. (correct)
  • A type of real estate investment.
  • A share of ownership in a company.

    • Which of the following statements best describes a tautology?

  • A proposal that is sometimes true and sometimes false.
  • A statement that can be true or false depending on conditions.
  • A logical statement that cannot be determined.
  • A compound statement that is always true. (correct)

    • What is a fallacy in propositional logic?

  • A compound statement that is false in all cases. (correct)
  • A logically contradictory statement.
  • A statement that is always valid.
  • A type of simple proposition.

    • Which type of proposition combines simpler propositions using logical connectors?

    <p>Compound proposition</p> Signup and view all the answers

    In the context of Simple Interest, what does the principal indicate?

    <p>The total amount borrowed or invested.</p> Signup and view all the answers

    What is the principal amount in the context of borrowing or investing?

    <p>The amount of money borrowed or invested on the origin date</p> Signup and view all the answers

    How is simple interest calculated?

    <p>Interest rate multiplied by the principal amount and the time</p> Signup and view all the answers

    What does the maturity value represent?

    <p>The sum of the principal and the interest at the end of the term</p> Signup and view all the answers

    What does an annuity consist of?

    <p>A sequence of payments made at equal intervals of time</p> Signup and view all the answers

    What is the period of deferral in a deferred annuity?

    <p>The time between the purchase of an annuity and the start of payments</p> Signup and view all the answers

    Which of the following best describes compound interest?

    <p>Interest calculated on both the principal and previously accumulated interest</p> Signup and view all the answers

    What is a stockholder?

    <p>A person who owns shares in a company</p> Signup and view all the answers

    What does the term 'cash flow' refer to?

    <p>The net amount of cash being transferred in and out of a company</p> Signup and view all the answers

    Study Notes

    Simple Interest

    • Calculated by multiplying interest rate, principal, and time
    • Principal: Amount borrowed or invested initially
    • Rate: Percentage charged by lender or investment increase
    • Interest: Amount paid or earned for using money
    • Maturity Value/Future Value: Principal + accumulated interest over time
    • Time/Term: Years, days, or months of loan/investment
    • Ordinary Time/Banker's Rule: Assumes each month has 30 days (360 days per year)
    • Exact Time/Actual Time: Uses exact number of days (365 days per year)

    Compound Interest

    • Interest calculated on principal and accumulated past interest
    • Annuity: Series of equal payments at fixed intervals
    • Payment Interval: Time between payments
    • Term of Annuity: Time between first and last payments
    • Regular/Periodic Payment (R): Amount of each payment
    • Future Value (F): Sum of all future values of payments
    • Present Value (P): Sum of all present values of payments

    Present Value and Future Value of an Annuity

    • Future Value: Sum of future values of all annuity payments
    • Present Value: Sum of present values of all annuity payments
    • Deferred Annuity: Annuity payments begin after an initial delay
    • Period of Deferral: Time between purchase and annuity start
    • Stock: Part ownership in a company
    • Stockholder: Owner of company stock
    • Dividend: Company profit distributed to shareholders
    • Bonds: Loans made to organizations (like governments)
    • Bondholder: Owner of bonds
    • Par Value/Face Value: Amount borrowed for bonds
    • Proposition: Declarative statement (true or false)
    • Compound Proposition: Proposition created by logical connectors
    • Conditional Statement: Hypothesis followed by a conclusion (if-then)
    • Tautology: A compound statement always true
    • Fallacy: A compound statement always false
    • Contingency: Compound proposition with both true and false values

    Savings

    • Simple Interest
    • Finding Time in Simple Interest
    • Finding Principal in Compound Interest
    • General Annuity
    • Rate per Conversion Period
    • Conversion Period/Frequency
    • Deferred Annuity
    • Dividend per Share
    • Proportional Logic Table/Truth Table

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    Description

    This quiz covers the essential concepts of simple and compound interest, including the calculations for principal, interest rates, and annuities. Understand how to determine both the future value and present value of investments. Test your knowledge on the differences between ordinary and exact time calculations as well.

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