Chapters 1 and 2 Flashcards
Term
The contracted duration of an investment or loan
Interest
The amount of money earned on an investment or paid on a loan
Fixed Interest Rate
Guaranteed not to change during the term of an investment or loan
Principle
The original amount of money invested or loaned
Simple Interest
The amount of interest earned on an investment or paid on a loan based on the principle and the simple interest rate
Maturity
The end date of an investment or loan, at the end of the term
Future Value
The amount that an investment will be worth after a specific period of time
Rate of Return
The ratio of money earned or lost on an investment, relative to the amount invested
Compound Interest
The interest that is earned or paid on both the principle and the accumulated interest
Compounded Annually
When compound interest is earned or paid yearly
Compounding Period
The time over which interest is determined (annually, semiannually, quarterly, monthly, weekly, daily)
Rule of 72
Formula for estimating the doubling time of an investment;
72 divided by the interest rate = doubling period
Present value
The amount that must be invested now to result in a specific future value in a certain time at a given interest rate
Portfolio
One of more investments held by an individual investor or by a financial organizer
Collateral
an asset that is held as security against the repayment of a loan
