16 Questions
What is the definition of a 'lender' or 'creditor'?
A person who invests money or makes funds available
What does 'principal (P)' refer to in the context of simple interest?
The amount of money borrowed or invested on the origin date
What is the 'maturity value or future value (F)' in the context of simple interest?
The amount after t years that the lender receives from the borrower on the maturity date
What does 'simple interest (𝑰𝒔)' refer to?
Interest that is computed on the principal and then added to it
When does the 'repayment date or maturity date' occur?
On the date when the money borrowed or loan is to be completely repaid
How is 'compound interest (𝑰𝒄)' computed?
Interest that is computed from the principal and on the accumulated past interests
What is the difference between actual number of days and approximate number of days?
Actual number of days excludes the origin date, while approximate number of days assumes 30 days in each month within the term.
What is the difference between exact interest and ordinary interest?
Exact interest is based on a 365-day year, while ordinary interest is based on a 360-day year or the banker’s rule.
What does compound interest refer to?
Interest that is computed from the principal and on the accumulated past interests.
What is the present value in the context of compound interest?
The amount of money borrowed or invested on the origin date.
What does nominal interest rate represent?
The annual rate of interest usually advertised.
What is meant by the term 'annuity'?
A sequence of payments made at equal (fixed) intervals or periods of time.
What distinguishes a simple annuity from a general annuity?
The payment interval is the same as the interest period for a simple annuity, but not for a general annuity.
What characterizes an ordinary annuity?
Payments are made at the end of each payment interval.
What is meant by 'effective interest rate'?
The actual rate of interest that takes effect in the loan/investment.
'Payment interval' in the context of annuities refers to:
The time between successive payments.
Test your understanding of the definition of terms related to simple interest in General Mathematics. Topics include lender, borrower, origin date, repayment date, and time or term.
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