13 Questions
What is the formula for calculating simple interest?
𝐈𝑆 = 𝑃𝑟𝑡
What type of interest remains constant throughout the term?
Simple Interest
Who is the person or institution that invests the money or makes funds available known as?
Lender or creditor
What is an annuity in which the periodic payment is made at the beginning of each interval?
Annuity Due
Interest that is computed on the principal. The interest remains constant throughout the term.
interest
An annuity in which the periodic payment is made at the beginning of each interval
Annuity due
Date on which money is received by the borrower
Origin or loan date
Annuity in which the periodic payment is made at the end of each payment interval.
ordinary
Repayment date or maturity date – date on which the money borrowed, or loan is to be completely repaid
Which type of interest is computed on the principal and compounded throughout the term?
Compound Interest
What does the term 'ordinary annuity' refer to?
An annuity with payments at the end of each payment interval
What is the equivalent interest rate per payment denoted by in the annuity formulas?
i
Which date is defined as the date on which money is received by the borrower?
Origin date
Study Notes
Types of Interest
- Simple interest is calculated using the formula for simple interest.
- Simple interest remains constant throughout the term.
Annuities
- An annuity in which the periodic payment is made at the beginning of each interval is called an annuity due.
- An ordinary annuity is an annuity in which the periodic payment is made at the end of each interval.
- The equivalent interest rate per payment in annuity formulas is denoted by i.
Loan Terms
- The lender, or the person or institution that invests the money or makes funds available, is known as the investor.
- The date on which money is received by the borrower is called the issue date.
- The repayment date or maturity date is the date on which the money borrowed, or loan, is to be completely repaid.
Compound Interest
- Compound interest is computed on the principal and compounded throughout the term.
Test your knowledge of the simple interest formula and its components with this quick review quiz. Understand the concepts of principal, rate, and time, and how they contribute to calculating simple interest.
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