Lesson 1 Flashcards
1
Q
What is the maturity value?
A
The total amount the borrower needs to pay back, usually denoted by capital letter M.
2
Q
How is maturity value calculated?
A
M = P + I, where P is the principal and I is the interest.
3
Q
What is the formula for interest?
A
I = Prt, where P is the principal, r is the rate, and t is the time.
4
Q
Calculate the maturity value of a P10,000 loan at 8% interest in 5 years.
A
M = P + I = P10,000 + P4,000 = P14,000.
5
Q
Calculate the maturity value of a P10,000 loan at 8% interest in 8 months.
A
M = P + I = P10,000 + P533.33 = P10,533.33.
6
Q
What is an alternative formula for maturity value?
A
M = P(1 + rt).
