Lesson 2 - Interest

Question 1

is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

Answer 1

Time Value of Money (TVM)

Question 2

is the amount of money paid for the use of
borrowed capital.

Answer 2

interest

Question 3

Simple Interest (denoted as I) is defined as the interest on a loan or principal that is based only on the original amount of the loan or principal.

Answer 3

Simple Interest

(denoted as I)

Question 4

is the amount of money borrowed and on which interest is charged.

Answer 4

Principal

Question 5

is the amount earned by one unit of principal during a unit of time.

Answer 5

rate of Interest

Question 6

what type of simple interest is based on the one banker’s year. A banker year is composed of 12 months of 30 days each which is equivalent to a total of 360 days in a year.

Answer 6

Ordinary Simple Interest