RCSC 150B2 Chapter Notes - Chapter 2: Effective Interest Rate, Lump Sum
6 Dec 2017
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Limited supply and relatively high demand for paper currency. Annual percentage rate (apr): annual rate charged for borrowing money or earned by investing. Compounding: interest is added to your initial deposit and then interest is earned on interested. Annual percentage yield: how much total interest earned in a year. Shows effective interest rate which takes into account the effects of compounding. N: number of times interest payment is compounded per year. Understanding interest allows you to grasp concept of time value of money. A dollar now is worth more than dollar in the future, even after adjusting for inflation, because a dollar now can earn interest. Takes discipline to deposit money and time for the force to work. Present value: current value of an asset to be received in the future. Future value: projected value of an asset based on the interest rate and time in the account.
