Answer:
a. Simple interest: interest calculated on the original amount only
Example: Borrowing $1,000 at 5% simple interest for a year results in paying back $1,050.
b. Compound interest: interest calculated on the original amount plus any accumulated interest
Example: Investing $1,000 at 5% compound interest for two years results in a balance of $1,102.50.
c. Principal: original amount borrowed or invested
Example: A car loan for $10,000 has a principal of $10,000.
d. Annual interest rate: rate charged or paid on a loan or investment per year
Example: A savings account with a 5% annual interest rate earns $50 in interest per year on a balance of $1,000.
e. Period / term: length of time for a loan or investment
Example: A 5-year loan has a period or term of 5 years.
f. Annuity: financial product providing regular income for an initial investment
Example: An annuity purchased for $100,000 pays a fixed monthly payment for life.
g. Regular annuity: annuity providing payments at fixed intervals
Example: A regular annuity pays out $1,000 per month for 10 years.
h. Amortization: process of paying off a loan through regular, fixed payments
Example: A 30-year mortgage loan is amortized with fixed monthly payments covering interest and principal until the loan is paid off.
Step-by-step explanation: