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Mathematics in the Modern World > Module 7. Mathematics of Buying and Selling > Flashcards

Module 7. Mathematics of Buying and Selling Flashcards

1
Q

is calculated only on the original principal amount and is paid at the end of the loan

A

simple interest

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2
Q

is fee or rent that lenders charge to borrowers for the temporary use of the borrowed money

A

interest

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3
Q

is the amount borrowed

A

principal

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4
Q

is the percentage of the principal that will be charged for specified period of time

A

rate of interest

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5
Q

specified period of time in rate of interest examples

A
  • daily
  • weekly
  • monthly
  • yearly
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6
Q

Variables that will be in mathematical treatment of simple interest:
P

A

principal amount of the loan or investment

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7
Q

principal amount of the loan or investment

A

P

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8
Q

Variables that will be in mathematical treatment of simple interest:
r

A

annual rate of simple interest

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9
Q

annual rate of simple interest

A

r

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10
Q

Variables that will be in mathematical treatment of simple interest:
t

A

time period (term) of loan or investment

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11
Q

time period (term) of loan or investment

A

t

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12
Q

Variables that will be in mathematical treatment of simple interest:
I

A

amount of interest paid or received

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13
Q

amount of interest paid or received

A

I

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14
Q

Variables that will be in mathematical treatment of simple interest:
F

A

maturity value of the loan or investment

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15
Q

maturity value of the loan or investment

A

F

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16
Q

Simple interest formula:
I

A

I = Prt

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17
Q

Simple interest formula:
P

A

P = I/rt

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18
Q

Simple interest formula:
F

A

F = P + I
F = P (1 + rt)

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19
Q

Determining the time period

A
  1. loan date
  2. due date (maturity date)
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20
Q

the first day of a loan

A

loan date

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21
Q

last day of the loan

A

due date (maturity date)

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22
Q

due date is also called as

A

maturity date

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23
Q

Steps in solving number of days of a loan

A
  1. identify number of days remaining in first month by subtracting loan date from number of days in that month
  2. write number of days in each month
  3. add days from first to last month
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24
Q

Two ways of determining time period

A
  1. Approximate time
  2. Actual time
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25
uses 30 days in every month
approximate time
26
uses exact number of days in every specific month
actual time
27
Leap years
2016, 2020, 2024 (every 4 years)
28
is compound in 365 days in a year as the time factor denominator
exact interest
29
type of interest wherein the number of days is computed based on 360 days in a year
ordinary interest
30
Rate must be converted into a __ or a __ before substituting to any formula
- decimal - fraction
31
time period is computed in terms of __
years
32
Banks and most other institution use __ __
ordinary interest
33
"ordinary interest in actual time"
Banker's Rule
34
Banker's Rule
"ordinary interest in actual time"
35
if type of interest is not specified in any problem, the problem will be solved using the __ __
Banker's Rules (ordinary interest in actual time)
36
when the time period of a loan reaches its maturity date, the loan is said to __
mature
37
In that point, the borrower repays the principal and the interest. The total repayment is known as the __ __
future value (maturity value)
38
The __ __ is known as the future value (maturity value)
total repayment
39
the simple interest method is restricted mostly to __ and ____ __
- loans - interest-earning investments
40
is employed in virtually all instances where the duration exceeds one year, and it is also used for some short-term loans and investments
compound interest
41
is applied to long-term loans
principle of compound interest
42
the principle of compound interest is applied in ____ __
long-term loans
43
the procedure in which interest is periodically calculated and added to the principal
compound interest
44
time interval between succeeding interest calculations
conversion period
45
conversion period is also known as
- compounding period - interval period
46
the interest earned during a period is converted to __ at the end of the period because the __ and __ are combined and treated as the new __ for the succeeding period
- principal - principal and interest - principal
47
effect of converting interest to principal is that the interest earned in a period will also earn interest in all __ __
succeeding period
48
number of compoundings that take place in a year
compound frequency
49
compound frequency is also called as
conversion frequency
50
compounding frequency: annual
1
51
compounding frequency: semiannual
2
52
compounding frequency: quarterly
4
53
compounding frequency: bimonthly
6
54
compounding frequency: monthly
12
55
annual
1 year
56
semiannual
6 months
57
quarterly
3 months
58
bimonthly
2 months
59
monthly
1 month
60
is the stated annual interest rate on which the compound interest calculation is based
nominal interest
61
rate of interest earned in one conversion period
periodic interest rate
62
Mathematical treatment of compound interest: F
maturity value of the loan or investment
63
Mathematical treatment of compound interest: P
principal amounf
64
Mathematical treatment of compound interest: I
amount interest paid or received
65
Mathematical treatment of compound interest: j
nominal interest rate
66
Mathematical treatment of compound interest: m
number of conversion per year
67
Mathematical treatment of compound interest: t
time period
68
Mathematical treatment of compound interest: i
periodic interest rate
69
Mathematical treatment of compound interest: n
number of conversions of the loan
70
nominal interest rate
j
71
number of conversion per year
m
72
periodic interest rate
i
73
number of conversions of the loan
n
74
Compound interest formulas: F
F = P (1 + i) ^n
75
Compound interest formulas: P
P = F (1 + i) ^-n
76
Compound interest formulas: I
I = F - P
77
Compound interest formulas: i
i = j/m
78
Compound interest formulas: n
n = tm
79
Rounding-off is only permissible in the __ __
final result
80
refers to the periodic interest rate multiplied by the number of periods in a year
nominal interest rate
81
does not take compounding into account
nominal interest rate
82
nominal interest rates are not always __, unless they include the same compounding periods
comparable
83
considered a more accurate measure of interest
effective interest rate
84
calculated based on the nominal interest rate and its compounding periods
effective interest rate
85
different interest rates can be compared directly since they have been adjusted to reflect the __ _ __
effect of compounding
86
is the stated annual interest rate on which the compound interest calculation is based
nominal interest rate
87
"nominal" meaning
in the name only
88
not numerically equal to the actual rate of interest realized over a full year
nominal annual rate of interest
89
is the equivalent annually compounded rate
effective interest rate
90
Effective rate formula
r = (1 + j/m)^m - 1
91
Nominal rate formula
j = m( (^m√1 + r) - 1)
92
if the problem is silent where it does not say what rate should be used, use the __ __ formula
effective rate

Mathematics in the Modern World (13 decks)

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