Business Math Flashcards
the amount a borrower pays for using the money.
Interest (I)
the amount of money borrowed or deposited.
Principal(P)
the interest paid on one unit (peso) of capital (principal).
Rate of interest(r)
the amount of time allotted for repayment of the principal plus the interest. It is a term in years.
Time(t)
The principal amount plus the interest. Also called Future Value (FV) or Maturity Value.
Amount (A) or Balance
It is an interest that is computed on the principal amount
only.
Simple interest
It is an interest computed on the principal
and also on the accumulated
interest
Compound Interest
Simple interest formula
Is = Prt
Compound Interest formula
The amount (A) at the end of the year is equal to the sum of the principal (P) and the interest (Pr) for that year.
Ic = A - P
A = P + Pr = P(1 + r)
Simple interest Maturity Value or (Amount or
Balance) Formula
A = P + Is or
A = P + Prt or
A = P(1 + rt)
where:
A = Maturity value/Future value
P = Principal
Is = Simple Interest
Compound Interest Maturity Value or (Amount or
Balance) Formula
In general, when interest is compounded annually for n years, the amount (or future value) A is
A = P(1+ r)^t
Ic = A – P
where:
A = Maturity value/Future value
P = Principal
Ic = compound Interest
r = rate of interest, and
t = time or term in years or fraction of a year
Because interest is paid on interest, compound
interest is always _____ than simple interest.
greater
“Annual” ; K =?
K=1
“Semi-annual” ; k = ?
K=2
“Quarterly” ; K = ?
K = 4
“Monthly” ; k = ?
k = 12
“Daily” ; k = ?
k = 365
r/k is called the ____ ____
periodic rate
Compounding more than once a year formula
𝑨 = 𝑷(𝟏 + 𝒓/𝑲)^Kt
it pertains to the interval
for compounding
Period
Is. principal amount formula
P = Is/rt
P = F / (1 + rt)
Is. rate formula
r = Is/Pt
Is. time formula
t = Is/Pr
Ic. principal amount formula
𝑷 = 𝑨/ (𝟏 +𝒓/𝑲)^𝑲t
interest based on a 360-day year.
Ordinary Interest or Banker’s Interest
interest based on a 365-day year
Exact Interest
A 360-day year is favorable for the ______ while a 365-day year is favorable for the _______.
lender ; borrower
a sequence of payments made at equal (fixed) intervals or periods of time
Annuity
the time between successive payments
Payment interval
time between the first payment interval and last payment
interval
Term of an annuity, t
the amount of each payment
Regular or Periodic payment, R
sum of future values of all the payments to
be made during the entire term of the annuity.
Amount (Future Value) of an annuity, F
sum of present values of all the payments to be
made during the entire term of the annuity
Present value of an annuity, P
A _______ annuity is an annuity where the payment interval is the SAME as the interest period.
simple
A ______ annuity is an annuity where the payment interval is NOT the same as the interest period.
general
Annuity. According to payment interval and interest period
Simple Annuity
General Annuity
Annuity. According to time of payment
Ordinary Annuity/Annuity Immediate
Annuity Due
Annuity. According to duration
Annuity Certain
Contingent Annuity
A type of annuity in which the payments are made at the END of each payment interval
Ordinary Annuity/Annuity Immediate
A type of annuity in which the payments are made at BEGINNING of each payment interval
Annuity Due
An annuity in which payments begin and end at DEFINITE TIME
Annuity Certain
An annuity in which the payments extend over an INDEFINITE (or indeterminate) length of time
Contingent Annuity
Annuities may be classified according to ______ interval and _______ period.
payment ; interest
one powerful tool to illustrate or to visualize simple and general annuity.
Time diagram for its cash flow
Regular Payment is also called as?
Periodic payment
“per annum” ; K = ?
12
fair market value is also called as ?
economic value
a.____________________ is a single amount that is equivalent to the value of the payment stream at that date. This particular date is called a b.______ ______
a. fair market value / economic value
b. focal date
an annuity that does not begin UNTIL A GIVEN TIME INTERVAL HAS PASSED
Deferred Annuity
time between the purchase of an annuity and the start of the payments for the deferred annuity.
Period of Deferral
two types of stocks
preferred stock
common stock
are certificates that promise to pay a fixed rate of interest by a corporation or government at the end of certain time.
Bonds
______ or SHARES are units of equity or ownership in a company.
Stocks
Dividend per Share formula
total dividend / total share
Par Value x Dividend Percentage
The ______ value is the same as its face value. This is the amount printed on the face of the bond which the borrower promises TO PAY the bond holder on the due date
par
The ____ value of a bond is the price at which the bond is being SOLD.
market
market value > par value
selling at premium
market value < par value
selling at discount
It is a place where stocks are bought and sold.
stock market
It is composed of 30 companies that are carefully selected to represent the general movement of the market price.
Philippine Stock Exchange Index (PSEi)
It is the main platform for bonds and fixed income securities in the
Philippines.
Philippine Dealing and Exchange Corporation (PDEx)
It is the largest issuer of the Philippine bonds.
Philippine Government
a sum of money that is borrowed from a lending institution with the promise
to pay back with interest over pre-determined period of time.
LOAN
types of loan
business
consumer
is money lent to an individual for personal or family purpose.
Consumer Loan
Type of Consumer loan. is a contract between a borrower and a lender that allows
someone to borrow money to buy a house, apartment, condo, or other livable
property. A home loan is typically paid back over a term of 10, 15 or 30 years.
Home loan
Type of Consumer loan. a type of loan with no specific purpose. (Ex: credit card,
educational purposes,etc.)
personal loan
Type of Consumer loan. also known as an automobile loan, or auto loan) is a
sum of money a consumer borrows in order to purchase a car
Car loan
money lent specifically for a business purpose. It may be used to
start a business or to have a business expansion.
business loan
