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Description
Flashcards by Laura Samuelson, updated more than 1 year ago
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Created by Laura Samuelson
about 1 year ago
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| Question | Answer |
| Annual Percentage Yield (APY) | Truth in Savings law forced banks to report actual interest in form of APY. Interest yield must be calculated on actual number of days bank has the money |
| Compound Amount | The future value of loan or investment |
| Compound Interest | The interest that is calculated periodically and then added to the principal. The next period the interest is calculated on the adjusted principal (old principal plus interest) |
| Compounded Annually | Interest on balance calculated once a year |
| Compounded Daily | Interest calculated on balance each day |
| Compounded Monthly | Interest on balance calculated twelve times a year |
| Compounded Quarterly | Interest on balance calculated four times a year |
| Compounded Semiannually | Interest on balance calculated two times a year |
| Compounding | Calculating the interest periodically over the life of the loan and adding it to the principal |
| Effective Rate | True rate of interest. The more frequent the compounding, the higher the effective rate |
| Future Value (FV) | Final amount of the loan or investment at the end of the last period. Also called compound amount |
| Nominal Rate | Stated rate |
| Number of Periods | Number of years times number of times interest is compounded per year |
| Present Value (PV) | How much money will have to be deposited today (or at some date) to reach a specific amount of maturity (in the future) |
| Rate for Each Period | Annual rate divided by number of times interest is compounded in one year |
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