Financial Mathematics Reviewer PDF

**Lender** or **creditor** -- person (or institution) who invests the money or makes the funds available. **Borrower** or **debtor** -- person (or institution) who owes the money or avails of the funds from the lender. **Origin** or **loan date** -- date on which money is received by the borrower....

**Lender** or **creditor** -- person (or institution) who invests the money or makes the funds available. **Borrower** or **debtor** -- person (or institution) who owes the money or avails of the funds from the lender. **Origin** or **loan date** -- date on which money is received by the borrower. **Simple Interest -** Interest that is computed on the principal and then added to it. **Interest -** Amount paid or earned for the use of money **Compound Interest -** Interest is computed on the principal and also on the accumulated past interest. **Principal -** Amount of money borrowed or invested on the origin date **Annuity -** Is a sequence of payments made at equal ( fixed) intervals or periods of time. **Payment Interval -** Is the time between successive payments **Simple Annuity -** The payment of interval is the same as the interest period. **General Annuity -** The payment interval is not the same as the interest period **Ordinary Annuity -** The payments are made at the end of each payment interval. **Annuity Due -** The payments are made at the beginning of each payment interval **Deferred -** The payments aren't made in the beginning nor the end of each period but some later date **Stocks -** Share in the ownership of a company **Common Stocks -** Is the type most people purchase. It represents ownership of a company and claim on part of the profits. Investors get one vote per stock. **Preferred Stocks -** Don't have the same voting rights, but investors are usually guaranteed a fixed dividend. If the company is liquidated, they are paid off first. **Dividend -** Share in the company's profit **Stock Market -** A place where stocks can be bought or sold, **Dividend Per Share -** Ratio of the dividends to the number of shares **Business Loan -** Money lent specifically for a business purpose. It may be used to start a business or to have a business expansion **Consumer Loan -** Money lent to an individual for personal or family purpose **Term of the Loan -** Time to pay the entire loan **Amortization Method -** Method of paying a loan (principal and interest) on installment basis, usually of equal amounts at regular intervals **Mortgage -** A loan, secured by a collateral, that the borrower is obliged to pay **Chattel Mortgage -** A mortgage on a movable property **Bonds -** Are interest bearing security which promises to pay amount of money on a certain maturity date as stated in the bond certificate, **Bondholders -** A person owning a bond or bonds issued by a government or a public company **Bond Market -** Is where investors go to buy and sell debt securities issued by corporation or government, **Fair Price of Bond -** Present value of all cash inflows to the bondholder **Declarative Sentence -** Makes a statement and give information that normally end with a full -- stop/period. **Imperative Sentence -** Give a command telling someone to do something and end with a full-stop/period or exclamation mark/point. PRACTICE: Find the maturity value and the compound interest if 100,000 Php is compounded annually at an interest rate of 3% in 5 years. Given : P = 100,000 r = 2% = 0.02 t = 5 years Use Formula: Maturity value \-\-\-\-\-\-- \-\-\--F = P(1+ r)^t^ Compound interest\-\-\-\-\-\--Ic = F -- P PRACTICE; refer to the table below: Principal (P) Rate (r) Time (t) Interest (Is) --------------- ---------- ---------- --------------- (A) 2.1% 5 1,500 40,000 (B) 3 4,860 25,000 0.3% **(C**) 275 15,000 10.5% 10 **(D**) Use the following formula: [\$P = \\ \\frac{\\text{Is}}{\\text{rt}}\$]{.math.inline} [\$t = \\ \\frac{\\text{Is}}{\\Pr}\$]{.math.inline} [\$r = \\ \\frac{\\text{Is}}{\\text{Pt}}\$]{.math.inline} Is = Prt Note: change the **rate to decimal** value then solve;