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Mathematics of Finance
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Learn various commonly used terms in the mathematics of finance.
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Mathematics of financeBMTH 120
Amount of Interest: the amount charged for using a principal amount for a period of
time.
Compounding Frequency: the number of times interest is compounded every year.
Compound Interest: a procedure where the interest is added to the principal at the end
of each compounding period to earn interest in the subsequent compounding period.
Compounding Period: the time interval between two successive interest dates.
Future Value: the accumulated value of a payment or series of payments
Guaranteed Investment Certificate (GIC): investment where the investor is
guaranteed to receive the full principal investment plus interest at the end of the
specified time period.
Interest: a fee paid by borrowers to lenders for using money temporarily.
Maturity Value: the accumulated value of a principal amount that is invested or
borrowed at an interest rate for a period of time.
Periodic Interest Rate: the interest rate for a given compounding period.
Simple interest rate: the rate at which principal amount is borrowed or invested.
Term Deposits: (also known as fixed deposits or time deposits) investments where
money is invested for a fixed period of time.
Time period: the period of time for which the principal amount is borrowed or invested
during which interest is charged or earned.
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