CHAPTER ONE Simple Interest: Accumulated only on the principle during the term of a loan at the statedannual rate Notation P: principal or present value of S I: simple interest S: accumulated (or future) value of P r: annual simple interest rate t: time in years I=Prt Exact Interest is 365 days where as Ordinary Interest is 360 days S=P(1+rt) P=S(1+rt)^(-1)
CHAPTER ONE Promissory Note: A written promise by a borrower to pay the creditor of the nite a specified amount of money, with or without interest, on a specific date (the due date) The amount to be paid (not including interest) is called the face value The term of the note is the amount of time that will elapse from the time the nite is written until the due date Thematurity dateis 3 days after the due date The maturity value is the value of the note at the maturity date To find proceeds first find maturity value and then discount maturity value back to when the note was sold Treasury Bill: The face value of a treasury bill is the amount that will be pain on the date of maturity (no 3 day grace)
CHAPTER ONE Demand Loans: The lender may demand full or partial payment and the borrower may repay all or any part of the loan without notice or penalty Interest is calculated on the unpaid portion of the loan, often payable monthly Rates fluctuate with the market Invoice Cash Discount: Cash discounts are offered to customers paying their balance in advance of their due date Equations of Value: Process of picking a specific focal date and either accumulating past sums forward or discounting future sums backward
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