SIMPLE AND COMPOUND INTEREST

lender or creditor

Person or institution who invests the money or makes the funds available

Borrower or debtor

person (or institution) who owes the money or avails of the funds from the lender

original or loan date

Date on which money is received by the borrower

Repayment date or maturity value

date on which the money borrowed or loan is to be completely repaid

Time or term (t)

amount of time in years the money is borrowed or invested; length of time between the origin and maturity dates

Principal (P)

amount of money borrowed or invested on the origin date

Rate (r)

annual rate, usually in percent, charged by the lender, or rate of increase of the investment

Interest (I)

The amount paid or earned for the use of money

simple interest (Is)

interest that is computed on the principle and then added to it

Compound Interest (Ic)

interest that is computed from the principal and also on the accumulated past interest

maturity value or future value (F)

amount after t years that the lender receives from the borrower on the maturity date

interest

amount paid or earned for the use of money

simple interest

the interest is calculated only once for the entire rate of the loan. at the end of the time period, the borrower replace the principal plus the interest.

maturity (future) value

the total payback of principal & interest of an investment or a loan

ordinary interest

calculated on the basis of a 360-day year or a 30-day month

exact interest

calculated on a 365-day year

actual time

the number of days is obtained by counting all the days, inclusive between the 2 given dates including the last day but not the first day

approximate time

assume that every month counts 30 days

compound interest

the interest is calculated more than once during the time period of the loan.

conversion of interest period

time between successive conversion of interest

frequency conversion (m)

number of conversion periods in 1 year

nominal rate

annual rate of interest

annuity

a sequence of equal payments made regularly or periodically.

amortization

a dept repayment scheme in which the original amount borrowed is repeated by making equal payments periodically.

stocks and bonds

represents shares and ownership in a company.

share

is a unit of ownership of a corporation's profits and assets.

ownership

can be quantified by dividing the number of shares owned by the number of shared issued.

credit cards

a plastic card which contains information and authorizes the person whose name appears on it to charge purchases or services to his account for which he will be later be billed. the information on the cards can be read by store readers in atms.