Interest and Commission Terms - BusMath

Interest

cost of borrowing money/reward for saving it

Principal

amount borrowed

Rate/Interest Rate

Cost of using money expressed as a percentage of the principal for a given   period of time, which is usually per year.

TIme

term/period of the loan

Interest expense

amount of money charged for the use of money from the POV of the borrower/debtor

Interest Income

is the amount of money earned on invested money or money lent from the point of view of the creditor

Simple Interest

is the interest computed on the original principal for any time period  or length of time money is borrowed or lent/invested.

Mortgage

when a property is used as collateral for a loan from a Financial Institution

Amortization

installment payment on the loan

Compound Interest

computed based on the principal plus the accumulated interest. This is why compound interest is also known as the “interest on top of the interest.”

Ordinary Interest

interest paid based on 360 days a year

Exact Interest

interest paid based on 365 days a year

Actual no. of days

precise number of days for time

Approximate no. of days

assumes all months has 30 days for time

Straight Commission

when sales agent earn commission only

Salary-Plus Commission

Graduated Commission

This is when sales agents earn a commission where commission rate increases as the sales volume increases.