Exam1 - Flashcards(2) - as the frequency of the...

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i Compound Interest
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Normally used for loans or investments of a year or more. Interest rate per compounding period.
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n r
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Annual interest rate. Total number of compounding periods.
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Increasing at increasing rate m
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Number of compounding periods in one year. Function for compound interest.
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Nominal Rate Nominal Rate
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The stated interest rate to be paid on an investment. i.e. Annual Percentage Rate (APR)
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Effective; Nominal Effective Rate
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The actual increase in an investment. ____ rate is higher than ____ rate if interest is compounded.
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Annuity Effective Rate
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i.e. Annual Percentage Yield (APY) A sequence of equal payments made at equal periods of time.
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Sinking Fund Ordinary Annuity
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Payments are made at the end of the time period, and the frequency of the payments is the same
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Unformatted text preview: as the frequency of the compounding. Periodic payments are made to meet some future obligation (college savings plan). Sinking Fund and Amortization Amortization Periodic payments are made to dispose of a present obligation (car loan). Ordinary Annuity: Term Payment Period The time between payments. The time from the beginning of the first pay period to the end of the last pay period. Present Value of an Annuity Future Value of the Annuity The sum of the compound amounts of all the payments, compounded to the end of the term (the final sum on deposit). The amount that would have to be deposited in one lump sum today (at the same compound interest rate) in order to produce the same balance at the end of t years....
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This note was uploaded on 08/30/2011 for the course ECO 3401 taught by Professor Staff during the Spring '08 term at University of Central Florida.

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Exam1 - Flashcards(2) - as the frequency of the...

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