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MMW Chap 6 & 7 > Chapter 6: Mathematics of Finance > Flashcards

Chapter 6: Mathematics of Finance Flashcards

(59 cards)

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1
Q

Fee paid for borrowed money

A

Interest

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2
Q

Interest that is calculated based on the principal amount borrowed/invested not including the previous interest/s

A

Simple Interest

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3
Q

Simple Interest Formula

A

I = PRT

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4
Q

Future/Maturity Value for Simple Interest Formula

A

A = P + I

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5
Q
  • Is an interest calculated on any balance including previous interest/s
  • Future amount/value of the money loaned/invested is usually the focus
A

Compound Interest

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6
Q

Amount calculated after n years of having compound interest

A

Compound Amount

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7
Q

Compound Interest Formula

A

A = P (1 + r/n)^nt
P = A / ((1 + r/n)^nt)

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8
Q

Small plastic/metal card issued by a bank/financial company

A

Credit Card

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9
Q

Represents a line of credit

A

Credit Card

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10
Q

Where to Get Credit Card

A
  • Mail
  • Financial Institutions
  • Department/Chain Stores
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11
Q

Account with money that you can borrow repeatedly

A

Line of credit

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12
Q

Deducting money from checking/savings account

A

Debit Card

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13
Q

7 Basic Credit Card Features

A
  • Credit Card Type
  • Balance
  • Grace Period
  • Annual Percentage Rate (APR)
  • Credit Card Fees
  • Credit Limit
  • Rewards and Perks
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14
Q

Single credit card issuer may issue multiple versions of the same type of credit card

A

Credit Card Type

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15
Q
  • Total amount owed
  • Higher the credit card balance, the lower the available credit
A

Balance

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16
Q

Amount of time you have to pay your balance in full before a finance charge/interest is applied

A

Grace Period

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17
Q

Grace Period is typically how many days

A

20 - 25

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18
Q

Balance transfers/cash advances typically do not have a _________

A

grace period

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19
Q

If you carry balance from pervious month, you might not have a _______ for new purchases

A

grace period

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20
Q

Interest rate applied to any balance you carry past the grace period/amount of interest that is charged on a balance over the course of a year

A

Annual Percentage Rate (APR)

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21
Q

Maximum balance you can have on the credit card

A

Credit Limit

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22
Q

These include cashback, miles points, discounts

A

Rewards and Perks

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23
Q

These are based on transaction/penalty

A

Credit Card Fees

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24
Q

6 Types of Credit Card Fees

Study These Flashcards
A
  • Annual Fee
  • Application Fee
  • Balance Transfer Fee
  • Cash Advance Fee
  • Decline Fee
  • Foreign Transaction Fee
25
Fee for every year for using credit card
Annual Fee
26
Fee to apply for a card
Application fee
27
Fee to move balance of card to another
Balance Transfer Fee
28
Fee when you withdraw money from the card or an ATM
Cash Advance Fee
29
Fee when you try to make payment on something you do not have the money for
Decline Fee
30
Fee when buying something overseas
Foreign Transaction Fee
31
9 Types of Credit Cards
* Plain * Balance Transfer * Rewards * Student * Charge * Secured * Limited Purpose * Subprime * Business
32
3 Types of Rewards Credit Card
* Cashback * Points * Travel
33
No frills/rewards, has revolving balance up to a certain credit limit
Plan CC
34
Low introductory rate n balance transfers for a certain period of time
Balance Transfer CC
35
Offers rewards on purchases
Rewards CC
36
Reduce balance/redeem cash rewards only as credit
Cashback Rewards Cards
37
Based on how much you spend. E.g auto rewards/hotel rewards
Points Rewards Cards
38
- Mileage points
Travel Rewards Cards
39
- Designed for students, may have rewards/low-interest rate on balance transfers
Student CC
40
Do not have a spending limit, must be paid in full at the end of each month
Charge CC
41
Requires security deposit, equal to credit limit
Secured CC
42
Used at specific location, with minimum payment and finance charge
Limited Purpose CC
43
Worst credit card products, have highest interest and fees
Subprime CC
44
- For business use, personal credit history is still considered
Business CC
45
A type of payment made in the early stages of a purchase of an expensive good or service
Down Payment
46
The first/initial payment that one makes when one buys something with an agreement to pay the rest later
Down Payment
47
Amount that is borrowed to buy real estate
Mortgage Loan
48
When you make your property as collateral for a loan from a financial institution (bank)
Mortgage loan
49
Down payment formula
Down payment = purchase price x Down Payment %
50
Mortgage loan formula
Mortgage loan = Purchase price – Down Payment
51
- Refers to installment payment of loan - Spreading out or gradual payment of a loan/debt over a period of time - E.g monthly payments
Amortization
52
- The time period until the final payoff of the mortgage - Total number of payments
Term
53
2 Types of Mortgages
* Adjustable-rate mortgage (ARM) * Fixed-rate mortgage
54
Interest rate is fixed for an initial term then fluctuates with market interest rates
Adjustable-rate mortgage (ARM)
55
Interest rate that is set at the beginning and never changes over the entire term of the loan
Fixed-rate mortgage
56
Most common fixed-rate mortgage
15 and 30 years
57
Refer to a monthly payment on a mortgage
Monthly Mortgage Payment/Amortization
58
Monthly Mortgage Payment formula
A ((r/n)/1 - [1 + r/n]^-nt)
59
List of each mortgage payment, the payment number, the interest payment, the amount applied toward principal amount, and the resulting outstanding balance to be paid
Amortization Schedule

MMW Chap 6 & 7 (3 decks)

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