Managing Money and Compound Interest 4b

Flashcards on Managing Money and Compound Interest

Principal

The balance upon which interest is paid.

Simple interest

Interest paid only on the original principal.

Compound interest

Interest paid on the original principal and accumulated interest.

Simple interest

Does a savings bond usually pay simple or compound interest?

A

The accumulated balance after Y years.

P

The starting principal.

APR

Annual percentage rate (as a decimal).

Y

Number of years.

n

Number of compounding periods per year.

Annual Percentage Yield (APY)

The actual percentage by which a balance increases in one year.

Yes

Is APY greater than APR if interest is compounded more than once a year?

e

A special irrational number with a value of approximately 2.71828.