Pre-Calculus Math 11 Chapter 7: Financial Literacy

Vocabulary flashcards covering key financial terms, compound interest formulas, TVM solver parameters, return on investment, and loan definitions.

Compound Interest

When earned interest is added to the principal, so the next time interest accrues, the new principal is larger than the previous one.

Compound Interest Formula

The formula $A = P\left(1 + \frac{r}{n}\right)^{nt}$, where $A$ is total amount, $P$ is principal, $r$ is annual interest rate, $n$ is compounds per year, and $t$ is number of years.

Time Value of Money (TVM)

A financial concept (abbreviated TVM) evaluated in TVM Solvers using key inputs like $N$, $I\%$, $PV$, $PMT$, $FV$, $P/Y$, and $C/Y$.

Present Value ($PV$)

The initial amount of money invested, borrowed, or paid out at the beginning of a financial period.

Future Value ($FV$)

The total dollar value of an investment or loan after a certain amount of time.

Return On Investment (ROI)

The performance ratio of an investment, calculated as $\text{ROI} = \frac{\text{future value} - \text{initial value}}{\text{initial value}}$.

Investment

The allocation of money with the expectation that money (or some other benefit) will be returned with interest at some future point.

Stocks

The total value of a corporation's assets partitioned into shares after all debt has been accounted for.

Bank Loan

A loan used to purchase bigger ticket items (e.g. appliances, cars, a house) paid back in monthly installments over an amortization period.

Credit Card

A loan mechanism used to purchase goods and services on credit without cash, typically carrying lower borrowing limits and higher interest rates.

Line of Credit

A flexible option similar to a credit card used for unexpected circumstances where funds can be accessed at any time, usually having higher borrowing limits and lower interest rates.

Student Loan

A loan offered to post-secondary students to help cover the cost of higher education, featuring lower interest rates and borrower-friendly repayment terms.

Down Payment

The initial payment made on the price of a house before a mortgage loan is acquired.

Length of Amortization

The total time before a loan amount is completely paid off, measured in years or months.

Monthly Payment Amount

The dollar amount paid per month towards both principal and interest on a mortgage or loan.

Payments Per Year ($P/Y$)

A parameter in the TVM Solver representing the number of payments made annually.

Compounding Periods Per Year ($C/Y$)

A parameter in the TVM Solver representing the number of compounding periods annually.