chapter 1: financial mathematics - investing money · 1.1 simple interest.notebook 2 term (t) the...
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1.1 Simple Interest.notebook
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Chapter 1: Financial Mathematics - Investing Money
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term (t) 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 (r) an interest rate that is guaranteed not to change during the term of an investment or loan.
principal (P) the original amount of money invested or loaned.
simple interest (i) the amount of interest earned on an investment or paid on a loan based on the original amount.
maturity the contracted end date of an investment or loan at the end of the term.
1.1Simple Interest
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An amount of money was invested. Interpret the graph to determine
a) how much money was invested,
b) the value of the investment at the end of the first year, and
c) the rate at which the value grew between the beginning and end of the first year.
SAMPLE ANSWER
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Total simple interest earned:
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future value the amount, A, that an investment will be worth after a specified period of time.
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Future Value:
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Answer
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Would it make a difference if interest was only paid annually?
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rate of return the ratio of money earned/lost on an investment relative to the amount of money invested, usually expressed as a decimal or a per cent.
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