Chapter 4

Question 1

annual percentage
rate (APR)

Answer 1

annual rate charged for borrowing or
earned by investing

Question 2

compounding

Answer 2

process
whereby the value of an
investment increases
exponentially over time
due to earning interest on
interest previously earned

Question 3

annual percentage
yield (APY)

Answer 3

effective
yearly rate of return taking
into account compounding
interest

Question 4

ordinary annuity

Answer 4

stream
of equal payments that occurs
at the end of a period

Question 5

annuity due

Answer 5

stream of
equal payments that occurs at
the beginning of a period