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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. |
| 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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