Financial Management Flashcards
the effective handling of money through planning,
organizing, directing and controlling funds in a
corporation or for an individual
Financial Management
amount of money paid or earned for the use of money on
the original principal only
Simple interest
generally applied to loans or money invested to short-term (usually one year or less).
Simple Interest
interest on a loan or investment is calculated only on the
amount initially invested or loaned
SImple interest
What is the formula for S.I.
S.I. = PrT
How many days in ordinary interest
360 days (30 per month)
How many days in exact interest
365 days (366 if leap year)
If not specified in a problem, what type of Simple Interest applies
Ordinary interest
total amount owed or the total value of an investment after a
given amount of time.
Future Value
interest is earned not only on the initial amount invested,
but also on any interest.
Compound Interest
interest is earned on top of interest and thus
“compounds”
Compound Interest
The higher the number of compounding periods, the
greater the amount of compound interest
Compound Interest
a series of payments made at equal intervals
Annuity
can be classified by the frequency of payment dates. The
payments (deposits) may be made weekly, monthly, quarterly, yearly,
or at any other regular interval of time.
Annuity
examples are regular deposits to a savings account,
monthly home mortgage payments, monthly insurance payments and
pension payments
Annuity
Type of annuity; payments are made at the end
of each period.
Ordinary annuity
Type of annuity; Payments are made at the
beginning of each period
Annuity due
also known as annuity-immediate
Ordinary annuity
s a loan in which the borrower pledges some asset (e.g. a car or property)
as collateral for the loan, which then becomes a secured debt owed to the creditor who gives
the loan.
Secured Loan
a loan that doesn’t require any type of collateral. Instead of relying on
a borrower’s assets as security, lenders approve unsecured loans based on a borrower’s
credit worthiness.
Unsecured Loans
Type of annuity; examples of this are rentals, leases,
and insurance payments
Annuity Due
annuities where payments are made at the
beginning of each period and the compounding period is EQUAL to the
payment period.
Simple Annuities Due
annuities where payments are made at the
beginning of each period but the compounding period is NOT equal to the
payment period
General Annuities Due
The first payment is not made
at the beginning nor end of the
payment interval, but a later
date
Deferred Annuities
the length
of time from the present to the
beginning of the first payment
interval.
Deferment period
