Actuarial Science 2553A/B Lecture Notes - Lecture 1: Financial Transaction, Interest
11 Oct 2016
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Chapter 1 the time value of money. In any financial transaction, there are two parties: Person a is called the lender or. Person b is called the borrower or. The debtor must pay back the original amount borrowed (at some point in the future) along with a fee charged for the use of the money, called interest. = a dollar amount of money representing a fee or service charge paid to the lender for the use of his/her money. S = accumulated or future value of p. In this chapter, we will study the various methods by which interest is calculated and paid. Consider a financial transaction in which an investor deposits in an account or fund (in this case, p = 1) We wish to determine how much money the investor will receive after a certain period of time.
