GenMath Terms 2

• Lender or creditor is the person who invests the money or makes the funds available.
• Borrower or debtor is the person who owes the money or avails of the funds from the lender.
• Origin or loan date is the date on which money is received by the borrower.
• Repayment date or maturity date is the date on which the money borrowed or loan is to be completely repaid.
• Time or term (𝑡) is the amount of time in years the money is borrowed or invested;length of time between the origin and maturity dates.
• Principal (𝑃) is the amount of money borrowed or invested on the origin date.
• Rate (𝑟) is the annual rate, usually in percent, charged by the lender, or rate of increase of the investment.
• Interest (𝐼) is the amount paid or earned for the use of money.
• Simple Interest (𝐼𝑠) is interest that is computed on the principal and then added to it.
• Maturity value or future value (𝐹) is the amount after 𝑡 years that the lender received from the borrower on the maturity date.
• Compound Interest (𝐼𝑐) is interest is computed on the principal and also on the accumulated past interests.
• One method to compute the outstanding balance is to get the present value of all remaining payments.
• Frequency of conversion (𝑚) is the number of conversion periods in one year.
• Conversion or interest period is the time between successive conversions of interest.
• Total number of conversion periods (𝑛) is the frequency of conversion ×time in years.
• Nominal rate (𝑖(𝑚)) is the annual rate of interest.
• Semi-annually is represented as 𝑝 = 2.
• Annually is represented as 𝑝 = 1.
• The term of an annuity is the time from the beginning of the first payment interval to the end of the last payment interval.
• The regular or periodic payment is the size or amount of each annuity payment.
• The amount (future value) of an annuity is the sum of future values of all the payments to be made during the entire term of the annuity.
• The present value of an annuity is the sum of present values of all the payments to be made during the entire term of the annuity.
• Stocks are shares in the ownership of the company.
• Owners of stocks may be considered as part owners of the company and are called shareholders or stockholders.
• Common stocks receive dividends, which vary depending on the performance of the company.
• Preferred stocks receive dividends, which are fixed.
• Stocks can be bought or sold at its current price, which is called Market Value.
• Bonds are interest-bearing security which promises to pay a stated amount of money on the maturity date and regular interest payments called coupons.
• A coupon is a periodic interest payment that the bondholder receives during the time between purchase date and maturity date, usually received semi-annually.
• The coupon rate (r) is the rate per coupon payment period.
• The price of a Bond (p) is the price of a bond at purchase time.
• Par value or Face Value (f) is the amount payable on the maturity date.
• If p = f, the bond is purchased at par.
• If p< f, the bond is purchased at a discount.
• If p> f, the bond is purchased at premium.
• The term (or tenor) of a bond is the fixed period of time in years at which the bond is redeemable as stated in the bond certificate, usually number of years from time of purchase to maturity date.
• The fair price of a Bond is the present value of all cash inflows to the bondholder.
• Amortization Method is a method of paying a loan principal and interest on installment basis usually of equal amounts at regular intervals.
• Mortgage is a loan secured by a collateral that the borrower is obliged to pay at specified terms.
• Chattel Mortgage is a mortgage on a movable property.