Chapter 10 and 12 key terms

Pregunta	Respuesta
Adjusted Balance	The balance after partial payment less interest is subtracted from the principal.
Banker's Rule	Time is exact days / 360 in calculating simple interest.
Exact Interest	Calculating simple interest using 365 days per year in time.
Interest	Principal * Rate * Time
Maturity Value	Principal plus interest (if interest is charged). Represents amount due on the due date.
Ordinary Interest	Calculating simple interest using 360 days per year in time.
Principal	Amount of money that is originally borrowed, loaned, or deposited.
Simple interest	Interest is only calculated on the principal. In I = P x R x T, the interest plus original principal equals the maturity value of an interest-bearing note.
Simple Interest Formula	Interest = Principal * Rate * Time
Time	Expressed as years or fractional years, used to calculate simple interest.
U.S. Rule	Method that allows the borrower to receive proper interest credits when paying off a loan in more than one payment before the maturity date.
Annual Percentage yeild (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 banks 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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