Term
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Definition
| The manifestation of the time value of money. |
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Term
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Definition
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Term
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Definition
| Earned when a person or organization saves, invests or lends money & obtains a return of a larger amount. |
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Term
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Definition
| (End amount) - (Original Amount) as a Percent(%) |
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Term
Formula for Interest Rate
or
Rate of Return
or
Return on Investment |
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Definition
| [(Interest accrued per time unit)/(Original Amount)] * 100% |
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Term
| An employee @ Laserkinetics can borrow $10,000 on May 1st & must repay a total of $10,700 exactly 1 yr later. Determine the interest amount and the interest rate paid. |
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Definition
($10,700) - ($10,000) = $700
Manipulating the equation...
% = ($700)/($10,000) |
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Term
| Calculate the amount deposited 1yr ago to have $1000 now @ an interest rate of 5%. Also calculate the amount of interest earned during this time period. |
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Definition
$1000 = x + x(0.05) = x(1 +0.05) = 1.05x
x = (1000)/(1.05) = 952.38
I = $1000 - 952.38 |
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