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Chapter 12 - Key Terms
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- 1Annual 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.
- 2Compound AmountThe future value of loan or investment.
- 3Compound InterestThe 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).
- 4Compounded AnnuallyInterest on balance calculated once a year.
- 5Compounded DailyInterest calculated on balance each day.
- 6Compounded MonthlyInterest on balance calculated twelve times a year.
- 7Compounded QuarterlyInterest on balance calculated four times a year.
- 8Compounded SemiannuallyInterest on balance calculated two times a year.
- 9CompoundingCalculating the interest periodically over the life of the loan and adding it to the principal.
- 10Effective RateTrue rate of interest. The more frequent the compounding, the higher the effective rate.
- 11Future Value (FV)Final amount of the loan or investment at the end of the last period. Also called compound amount.
- 12Nominal RateStated rate.
- 13Number of PeriodsNumber of years times number of times interest is compounded per year.
- 14Present 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).
- 15Rate for Each PeriodAnnual rate divided by number of times interest is compounded in one year.
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Información
- Descripción
- Chapter 12 of Practical Business Math Procedures covers compounding interest. It goes over terms relating to compounding terms, present value, and future value. It also touches on formulas and ways to find these values.
- Creado por
- Laney Feek
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