What is compound interest?
- The compound interest method is a
second method of computing interest.
- In it, the interest of each period is added
to the principal before interest is calculated
for the next period.
- With this method,
What is an annuity?
An annuity is a sequence of equal payments made at equal
intervals of time.
Examples of annuities:
Weekly wages, monthly payments of rent, annual payments
on life insurance
The time between successive payments of an annu
Def. The settlement of a loan including principal and
interests made by equal payments due at the ends of equal
intervals of time is called amortization of a loan.
The equal payments () form an ordinary annuity. We use
the same formula: