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Understanding Interest and Annuities Basics

The document outlines key financial concepts such as interest, principal, and types of loans and annuities. It explains the differences between simple and compound interest, various types of annuities, and the importance of collateral and fixed-rate mortgages. Additionally, it highlights the benefits of early investment and maintaining good credit standing through regular payments.

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8 views1 page

Understanding Interest and Annuities Basics

The document outlines key financial concepts such as interest, principal, and types of loans and annuities. It explains the differences between simple and compound interest, various types of annuities, and the importance of collateral and fixed-rate mortgages. Additionally, it highlights the benefits of early investment and maintaining good credit standing through regular payments.

Uploaded by

marquetaimogen18
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

REVIEWER IN GENERAL MATHEMATICS

Interest refers to the amount paid or earned for the use of money
Principal refers to the amount of money borrowed or invested on the origin date
Debtor the person or institution that owes money or avails the funds from the lender
Compound interest is computed on the principal and also on the accumulated past interest
Simple interest is computed only on the principal and remains constant throughout the term?
Examples of annuity; rental payment, monthly pension, car loan
Annuity due type of annuity where payments are made at the beginning of each payment interval
Simple annuity type of annuity where payment interval is the same as the interest period
Deferred annuity type of annuity where payments are not made at the beginning nor at the end of each payment interval but some later date
General annuity type of annuity where payment interval is NOT the same as the interest period
Bonds refers to a form of debt financing or raising money by borrowing from investors
Consumer loan is given to individuals for personal or family purposes
Business loan is provided by banks to the lender to start up or expand business
Proposition refers to declarative statement that is either true or false
Truth table represents the relationships between the truth values of propositions and compound propositions drawn from the given propositions
Tautology refers to the proposition that is always true
Fallacy refers to the proposition that is always false

Examples of simple annuity;


1. P2,300 deposited monthly for 23 years at 0.23% yearly compounded monthly.
2. P2,300 deposited semi-annually for 23 years at 0.23% yearly compounded every 6 months.
3. P2,300 deposited annually for 23 years at 0.23% yearly compounded every year.
Examples of general annuity;
1. P2,000 deposited quarterly for 2 years at 2% yearly compounded every 6 months.
2. P2,000 deposited semi-annually for 2 years at 2% yearly compounded every 4 months.
3. P2,000 deposited annually for 2 years at 2% yearly compounded every 2 years.

Why do people buy stocks?


They have guaranteed interest payment each year.
Par value refers to the per share amount as stated on the company certificate

Collateral refers to assets that can be used to secure a loan


Fixed-rate mortgage type of mortgage where the interest remains constant throughout the term of the loan?

Example of a simple proposition;


The normal vision of a person is 20/20.

NOTE:
Compound interest works well if you save early for retirement or invest early.
If you are planning to invest, compound interest is better than the simple interest.
The longer it takes for you to pay a debt, the greater the interest you pay.
If borrowers pay at least the minimum payment every month of their debt, their credit standing is good.

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