FINAL 01 - Mathematics of Investment Flashcards
Interest that is paid as a percent of amount borrowed or invested
Simple interest
Is the amount paid by a borrower to a lender for the use of money over a period
Interest
Date when a loan or investment is made, not included in the counting
Origin date
Date when the loan is paid or the investment is terminated; included in the counting
Maturity date
The time of a loan or investment that is obtained by counting the actual number of days between the origin date and the maturity date
Actual time
Same manner as actual time but on the assumption that each month has 30 days
Approximate time
Interest is applied whenever a given problem does not specify the time factor to be used; uses 360 days
Banker’s rule
Uses 365 days
Exact simple interest
Difference between the original principal and the total amount after the whole time frame
Compound interest
Is the sum of the principal and the compound interest
Compound amount
Indicate ownership, including claims on the assets and earnings, in a company or a corporation
Stocks
Is the monetary portion of the corporation’s earnings decided by its board of directors
Divided
Have limited voting rights but receive priorities in claiming a fixed divided
Preferred stockholders
Are the real owners of a company
Common stockholders
Is the stock’s dividend as a percentage of the stock price
Dividend yield
Measures the percentage of net income that is distributed to shareholders in the form of dividend during the year
Dividend payout ratio
Are dependent on the growth of the company
Stock prices
Is a model for determining the price of a stock based on a future series of dividends that grow at a constant rate
Gordon growth model
Assumes that growth is expected to change over time
Non-constant growth stock
Are long term debt instruments that promise a fixed income in the form of interest
Bonds
An annuity where the payment interval is the same as the interest period
Simple annuity
An annuity where the payment interval is not the same as the interest period
General annuity
A type of annuity in which the payments are made at the end of each payment interval
Ordinary annuity
A type of annuity in which the payments are made at the beginning of each payment interval
Annuity due
