Simple Interest and Loans Concepts

What term describes the initial amount of money borrowed or lent?

Which formula calculates simple interest?

When would you use the formula F = P(1 + rt)?

What does the term 'maturity date' refer to in the context of a loan?

Which of the following represents the formula for calculating compound interest compounded annually?

If a loan has an interest rate of 5% compounded quarterly, what is the value of m?

How is the total amount paid at the end of a simple interest loan calculated?

What is the formula to calculate the compound interest when compounded m times a year?

Simple Interest

Simple interest is calculated on the original principal amount
Formula: F = P + i or F = P(1 + rt)
F = final or future amount
P = Principal
i = interest
r = interest rate
t = time

Lender/Creditor

Person/institution that lends money

Borrower/Debtor

Person/institution that borrows money

Principal/Present Value

Original amount borrowed/lent

Interest

Amount paid for the use of money

Interest Rate

Percentage of interest over the principal divided by number of years

Origin/Loan Date

Date the borrower receives the money

Repayment/Maturity Date

Date the borrowed money is repaid

Time/Period/Term

Number of years the money is borrowed

Future Value/Maturity Value/Accumulated Value

Amount received by the lender at the maturity date
Formula: i = Prt

Compound Interest

Interest calculated on both the principal and accumulated interest
Formula (annually): F = P(1 + r)^t
F = maturity/future/final value
P = borrowed money or Principal
r = interest rate in %
t = time period
Formula (compounded m times a year): F = P(1 + r/m)^mt
- m = frequency of conversion (number of times interest is compounded per year)

Additional Compound Interest Details

m = 1 (compounded annually)
m = 2 (compounded semi-annually)
m = 4 (compounded quarterly)
m = 12 (compounded monthly)
m = 365 (compounded daily)

This quiz covers the essential concepts of simple interest, including the formulas used to calculate future value, principal, and interest rates. It also explains the roles of lenders and borrowers, and provides an introduction to compound interest. Test your understanding of these financial principles!