Economics 1 Flashcards
Amount of money earned by a given capital.
Interest
Interest directly proportional to the length of time and the amount of principal borrowed.
Simple Interest
Computed on the basis of one banker’s year
Ordinary Simple Interest
Computed based on exact number of days
Exact Simple Interest
Interest is computed every end of each interest period and the interest earned for that period is added to the principal.
Compound Interest
Specifies the rate of interest and the number of interest periods per year
Nominal Rate of Interest
The actual rate of interest on the principal for one year
Effective Rate of Interest
Consists of a series of equal payments made at equal intervals of time
Annuity
Equal payments are made at the end of each payment period starting from the first period.
Ordinary Annuity
Payment of the first amount is deferred a certain number of periods after the first.
Deferred Annuity
Payments are made at the start of each period, beginning from the first period
Annuity Due
Periodic payments continue indefinitely
Perpetuity
A sequence consisting of end-of-period payments, where each payment increases or decreases by a constant value
Uniform Arithmetic Gradient
a sequence consisting of end-of-period payments, where each payment increases or decreases by a fixed percentage.
Geometric Gradient
Sum of the first cost and the present worth of all future payments and replacements which is assumed to continue forever.
Capitalized Cost
