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Questions and Answers
What does the term 'principal' refer to in the context of simple interest?
What does the term 'principal' refer to in the context of simple interest?
In the simple interest formula, what does 'rt' represent?
In the simple interest formula, what does 'rt' represent?
Which formula would you use to calculate the future value of an investment using simple interest?
Which formula would you use to calculate the future value of an investment using simple interest?
What characterizes a simple annuity?
What characterizes a simple annuity?
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What is the primary difference between a simple annuity and a general annuity?
What is the primary difference between a simple annuity and a general annuity?
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Which statement correctly describes 'm' in the context of compound interest?
Which statement correctly describes 'm' in the context of compound interest?
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What does the formula Ic = F - P calculate in terms of finance?
What does the formula Ic = F - P calculate in terms of finance?
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Which option describes the term 'm' in compound interest calculations?
Which option describes the term 'm' in compound interest calculations?
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What term describes the sum of the present values of all payments in an annuity?
What term describes the sum of the present values of all payments in an annuity?
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Which of the following is an example of an annuity?
Which of the following is an example of an annuity?
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What does the formula for the Present Value of a simple annuity require?
What does the formula for the Present Value of a simple annuity require?
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Which of the following describes a deferred annuity?
Which of the following describes a deferred annuity?
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What does the Cash Value (CV) of an annuity represent?
What does the Cash Value (CV) of an annuity represent?
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Which statement correctly contrasts ordinary annuities and annuity due?
Which statement correctly contrasts ordinary annuities and annuity due?
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Which of the following accurately defines Fair Market Value?
Which of the following accurately defines Fair Market Value?
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In the formula for the Future Value of a simple annuity, what variables are involved?
In the formula for the Future Value of a simple annuity, what variables are involved?
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What does the period of deferral in an annuity represent?
What does the period of deferral in an annuity represent?
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What is the primary difference between stocks and bonds?
What is the primary difference between stocks and bonds?
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What is implied by investing in stocks regarding risk and return?
What is implied by investing in stocks regarding risk and return?
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What does the present value (P) of a deferred annuity account for?
What does the present value (P) of a deferred annuity account for?
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What guarantees bondholders compared to stock investors?
What guarantees bondholders compared to stock investors?
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Which of the following is true about preferred stocks?
Which of the following is true about preferred stocks?
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What characterizes the investment risk associated with bonds?
What characterizes the investment risk associated with bonds?
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What is a consequence of a company going bankrupt for stock investors?
What is a consequence of a company going bankrupt for stock investors?
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What does the term 'dividend per share' refer to?
What does the term 'dividend per share' refer to?
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What is the primary purpose of a coupon in bond investment?
What is the primary purpose of a coupon in bond investment?
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Which statement accurately describes the 'fair price of a bond'?
Which statement accurately describes the 'fair price of a bond'?
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What does the term 'par value' or 'face value' mean in the context of bonds?
What does the term 'par value' or 'face value' mean in the context of bonds?
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Which option best describes a 'stock market index'?
Which option best describes a 'stock market index'?
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What is the significance of the coupon rate in bond investments?
What is the significance of the coupon rate in bond investments?
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Which option best describes the role of 'collateral' in loan agreements?
Which option best describes the role of 'collateral' in loan agreements?
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Why might investments with higher returns be more appropriate for long-term investors?
Why might investments with higher returns be more appropriate for long-term investors?
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What is the term used for the total time allowed to pay off a loan?
What is the term used for the total time allowed to pay off a loan?
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Which method involves making equal payments on both principal and interest over time?
Which method involves making equal payments on both principal and interest over time?
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What is a mortgage on movable property specifically called?
What is a mortgage on movable property specifically called?
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Which of the following correctly symbolizes a conjunction in logical propositions?
Which of the following correctly symbolizes a conjunction in logical propositions?
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What does the biconditional statement 'p if and only if q' signify?
What does the biconditional statement 'p if and only if q' signify?
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Which logical connective is used to negate a proposition?
Which logical connective is used to negate a proposition?
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In the context of collateral, what is required to secure a mortgage loan?
In the context of collateral, what is required to secure a mortgage loan?
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What is termed as the remaining debt at a specified time in a loan agreement?
What is termed as the remaining debt at a specified time in a loan agreement?
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Study Notes
Simple Interest (Is)
- Interest calculated on the principal, remaining constant
- Lender/creditor: Person or institution investing money
- Borrower/debtor: Person or institution borrowing money
- Origin/loan date: Date money is received by borrower
- Repayment/maturity date: Date loan is repaid
- Time/term (t): Time in years borrowed/invested
- Principal (P): Amount borrowed/invested initially
- Rate (r): Annual interest rate (usually %)
- Interest (I): Amount paid/earned for use of money
- Maturity value/future value (F): Amount lender receives at maturity
- Simple Interest Formula: Is = Prt or F = P + Is or F = P(1 + rt)
- Compound Interest (Ic): Calculated on principal & accumulated past interest
Compound Interest Formula
- Ic = F - P
- Ic = P[(1 + i)n - 1]
- F = P(1 + i)n
Present Value
- P = F(1 + i)-n
Annuities
- Sequence of payments made at fixed intervals
- Simple Annuity: Payment interval same as interest period
- General Annuity: Payment interval different from interest period
- Annuity Payment (R): Fixed payment for each period
- Payment Interval: Time between successive payments
- Future Value of Annuity (F): Sum of future values of all payments
- Present Value of Annuity (P): Sum of present values of all payments
Future and Present Values of a General Annuity
- Present Value (P): P = R[1 - (1 + i)-n] / i
- Future Value (F): F = R[(1 + i)n - 1] / i
Cash Value or Cash Price (CV)
- Equal to down payment + present value of installment payments
Time Diagram
- Ordinary Annuity: Payments made at end of payment intervals
- Annuity Due: Payments made at beginning of payment intervals
Deferred Annuity
- Series of payments starting at a later date.
Definitions of Proposition
- Declarative sentence that is either true or false, but not both
Simple Proposition
- Conveys one thought, no connective words
Compound Proposition
- Contains two or more simple propositions, using connective words
Basic Logical Connectives
- Conjunction (∧): "p and q" written as p ∧ q
- Disjunction (∨): "p or q" written as p ∨ q
- Conditional (→): "if p then q" written as p → q or p → q
- Biconditional (↔): "p if and only if q" written as p ↔ q
- Negation (~): "not p" written as ~p
Additional Concepts
- Mortgage: Loan secured by collateral
- Chattel Mortgage: Mortgage on movable property
- Collateral: Assets securing a loan
- Outstanding Balance: Remaining debt
- Stocks: Share of ownership
- Bonds: Debt security promising payment
- Coupon: Periodic interest payment for bonds
- Par Value/Face Value: Amount payable at bond maturity
Stock and Bond Definitions
- Par Value: Per-share amount stated on company certificate
- Stock Index/Stock Market Index: Measures value of a stock market segment
- Business loan: Money specifically for business
- Consumer loan: Money for personal/family purposes
- Collateral: Assets securing a loan (real estate, investments, etc.)
- Amortization Method: Procedure for paying loan principal and interest
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Description
Test your knowledge on simple and compound interest concepts, including key terms like principal, interest rate, and maturity value. This quiz will challenge you on formulas and the differences between simple and compound interest calculations.