Interest

Question 1

is a fixed percentage of the total amount invested paid to an investor each year.

Answer 1

Simple interest

Question 2

Let 𝐼 be the

Answer 2

simple interest

Question 3

𝑃 be the amount invested called the

Answer 3

principal

Question 4

𝑟 be the fixed

Answer 4

percentage or the rate

Question 5

𝑡 be the number of years

Answer 5

years

Question 6

the principal is

Answer 6

invested

Question 7

is simple interest computed based on the ratio

Answer 7

Exact interest (𝐼𝑒) 1 year : 365 days

Question 8

on the other hand, is simple interest computed based on the ratio

Answer 8

Ordinary interest (𝐼𝑜), 1 year : 360 days

Question 9

The final amount of an investment (or debt) after interest is added is called

Answer 9

maturity value (𝑀V)

Question 10

The total amount at the end of the last period is called the

Answer 10

compound amount, denoted by 𝐴𝐴.

Question 11

The interest that is added to the old principal to make a new principal on which interest is again calculated for the next period is called the

Answer 11

compound interest, denoted by 𝐼c

Question 12

𝑚 is the number of

Answer 12

compounding periods in a year

Question 13

𝑟 is the

Answer 13

annual rate

Question 14

𝑃 is the

Answer 14

principal or the present value

Question 15

𝑚 = 1 if

Answer 15

compounded annually

Question 16

𝑚 = 2 if

Answer 16

compounded semi-annually

Question 17

𝑚 = 4 if

Answer 17

compounded quarterly

Question 18

𝑚 = 12 if

Answer 18

compounded monthly

Question 19

𝑚 = 365 if

Answer 19

compounded daily

Question 20

𝑛 is the

Answer 20

total number of compounding periods

Question 21

Since the maturity value of an amount invested or borrowed is the amount it is worth in the future at a given interest rate, it is also known as

Answer 21

future value.

Question 22

The future value (𝐹) is the amount that matured from the principal, that is,

Answer 22

present value (𝑃).