Year 12 Mathematics Standard: Investments and Loans

Comprehensive vocabulary flashcards covering the key terms, financial formulas, loan mechanisms, depreciation types, and credit concepts from Year 12 Standard Mathematics: Investments and Loans.

Simple Interest

Interest calculated solely as a percentage of the original principal invested or borrowed, represented by the formula $I = Prn$.

Principal

The initial amount of money invested or borrowed, also referred to as the present value ($P$ or $PV$).

Total Future Amount (Simple Interest)

The sum of the principal invested or borrowed and the simple interest earned, given by $A = P + I$.

Direct Variation (Simple Interest Graphs)

A mathematical relationship where interest $I$ and number of periods $n$ are directly proportional, expressible as $I = k \times n$ where $k = P \times r$.

Term Deposit

A bank investment where money is deposited at a fixed interest rate for a predetermined term, which is described as having matured at the end of the term.

Compound Interest

Interest calculated on the principal plus any previously accumulated interest from past periods (calculating interest on interest).

Future Value

The total compound value of an investment or loan after $n$ compounding periods, represented by the formula $FV = PV(1 + r)^n$ or $A = P(1 + r)^n$.

Inflation

An ongoing increase in the prices of all goods and services across an economy, calculated over time using the compound interest formula.

Annual Inflation Rate

The yearly percentage increase in the prices of goods and services, typically accompanied by increases in wages to maintain purchasing power.

Appreciation

The increase in the monetary value of an asset (such as artwork, gold, or property) over time, modeled using the compound interest formula.

Share (Stock)

A unit of partial ownership in a public company that is bought and sold on a stock exchange such as the ASX (Australian Securities Exchange).

Shareholder

An investor who buys shares in a company, thereby becoming a part-owner entitled to potential company profits.

Share Portfolio

A collective collection of shares owned in a number of different companies by an individual investor.

Capital

The funds raised by a company by selling shares to the public, which are used to fund operations, growth, or expansion.

Initial Public Offering (IPO)

The process where a private company goes public by offering its shares for purchase to the general public for the first time.

Issue Price

The initial fixed price at which shares are offered and sold when a company first executes an Initial Public Offering (IPO).

Market Price

The current fluctuating price of a share as traded on the stock exchange during trading hours, driven by market demand and speculation.

Closing Price

The final actual price that a share was sold for immediately prior to the close of the trading day on the stock exchange.

Brokerage Fee

A payment made to a stockbroker for facilitating the trading of shares, charged as either a flat fee or a percentage of the transaction plus $10\%$ GST.

Dividend

A distribution of a proportion of a company's profits paid to shareholders, calculated either as a set dollar amount per share or as a percentage of the issue price.

Dividend Yield

The annual percentage rate of return on a share based on dividends, calculated as $\text{Dividend Yield} = \frac{\text{Annual Dividend}}{\text{Market Price}} \times 100$.

Straight-Line Depreciation

A depreciation method where an asset loses value by the exact same dollar amount each time period, given by the formula $S = V_0 - Dn$.

Salvage Value

The remaining monetary value of an item or asset after depreciation has been deducted over a given number of periods ($S$).

Scrap Value

The salvage value of an item that is no longer functional for its primary original purpose, but possesses component parts that can still be sold.

Declining-Balance Depreciation

A depreciation method where an asset loses value by a fixed percentage of its previous period's value each time period, given by $S = V_0(1 - r)^n$.

Short-Term Loan

A loan that charges simple interest at a relatively high interest rate, usually requiring full repayment within a period of less than one year.

Long-Term Loan

A loan designed for large purchases (such as a home or higher education) that charges reducible compound interest over extended terms of several years or decades.

Establishment Fee

A fee charged upfront by a lender to cover the administrative costs of assessing and processing a loan application.

Origination Fee

A fee calculated as a percentage of the total loan amount, charged by the lender to cover the expenses of setting up the loan facility.

Valuation Fee

A fixed charge required by a mortgage lender to cover the professional assessment of a property's market value.

Conveyancing Fee

A fixed payment made to a conveyancer or solicitor to manage the legal transfer of a property title from seller to buyer.

Mortgage Registration Fee

A statutory fee paid to the government to register a mortgage against the legal title of a mortgaged property.

Lenders Mortgage Insurance (LMI)

An insurance fee charged to the borrower when their deposit is less than $20\%$ of the property value, protecting the lender against default.

Stamp Duty

A mandatory state government tax levied on property transactions, calculated according to the purchase value and geographical location of the property.

Buy Now Pay Later (BNPL)

A short-term financing arrangement that splits purchases into equal instalments without charging interest, but imposing fees for late or missed payments.

Lay-by

A payment scheme where a purchase is split into instalments, but the customer only receives the item after all payments have been completed in full.

Reducing-Balance Loan

A loan in which interest is recalculated at each period based on the outstanding balance owing, so interest decreases as regular repayments reduce the principal.

Present Value Interest Factors

Tabulated compounding factors derived from compound interest formulas used to determine loan values or repayments via the formula $PV = a \times X$.

Interest-Free Period

A promotional or introductory period on a credit card during which no interest is charged on purchases, provided the closing balance is paid by the due date.

Daily Interest Rate (Credit Card)

The interest rate applied each day to an outstanding credit card balance, calculated as $\text{Daily interest rate} = \frac{\text{Annual interest rate}}{365}$.

Cash Advance

A cash withdrawal made from an ATM using a credit card, which immediately incurs a percentage fee and charges daily interest without an interest-free period.

Balance Transfer

The process of moving an unpaid balance from one credit card to a different card account, typically to take advantage of an introductory low or $0\%$ interest rate.