Ch6 Finance Terms

Interest

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

Proceeds

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

Ordinary Annuity

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

Effective yield

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

Maturity Value

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

Amortized loan

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

compound interest

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

Quarterly

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

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.

Semi-annually

twice a year

Annuity

a series of equal regular deposits

Term

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

Sinking Fund

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

Periodic payments

Payments are made at regular intervals.

Equity

Money accumulated over time in a sinking fund.

Future value

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

Principal

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