Ch6 Finance Terms

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Interest

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17 Terms

1

Interest

If you borrow money you will be charged. If you deposit money you will be paid, this is....

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2

Proceeds

The amount of money that you actually receive in a discounted loan.

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3

Ordinary Annuity

An annuity in which payments are made at the end of the time periods of compounding.

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4

Effective yield

The interest rate that you actually pay on a discounted loan.

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5

Maturity Value

The amount of money that you pay back in a discounted loan.

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6

Amortized loan

A loan in which both principal and interest are paid off by a sequence of equal periodic payments.

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7

compound interest

interest earned on both the principal amount and any interest already earned

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8

Quarterly

Occurring or made at intervals of three months. (4 times per year)

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9

Discounted loan

A loan in which the calculated interest payment is subtracted, or discounted, in advance. Because this lowers the amount of available funds, the effective interest rate is increased.

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10

Semi-annually

twice a year

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11

Annuity

a series of equal regular deposits

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12

Term

Time from the beginning of the first time period in an annuity to the end of the last time period.

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13

Sinking Fund

An account that is made for accumulating money for a future need.

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14

Periodic payments

Payments are made at regular intervals.

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15

Equity

Money accumulated over time in a sinking fund.

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16

Future value

The amount of money in an account after time has past.

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17

Principal

An initial sum of money that you either borrow from or deposit into an account.

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