Question
Match each of the following descriptions with a term that defines it in the drop-down. Compound interest The worth of a sum of money or asset at a prior date in comparison with the future Quarterly compounding Compounding four times a year Accumulated or maturity value Number of times interest is compounded per year Fees charged by a lender to a borrower for the use of money or asset
Solution
4.4
(218 Votes)
Harvey
Veteran ยท Tutor for 11 years
Answer
1. Compound interest - The worth of a sum of money or asset at a prior date in comparison with the future2. Quarterly compounding - Compounding four times a year3. Accumulated or maturity value - Number of times interest is compounded per year4. Fees charged by a lender to a borrower for the use of money or asset
Explanation
1. Compound interest is the interest on a loan or deposit that is calculated based on both the initial principal and the accumulated interest from previous periods. In the context of the description provided, it refers to the worth of a sum of money or asset at a prior date in comparison with the future.2. Quarterly compounding refers to the process of adding interest to the principal amount four times a year, or every three months. This means that interest is calculated and added to the principal at the end of every quarter.3. The term "Accumulated or maturity value" seems to be mismatched with the description provided. Typically, the accumulated or maturity value refers to the total amount of money that will be received at the end of an investment period, including both the principal and the interest. However, the description provided relates to the frequency of compounding, which is not directly related to the maturity value.4. Fees charged by a lender to a borrower for the use of money or asset are typically referred to as "interest." However, in some contexts, it could also include other charges or fees associated with borrowing, such as origination fees, service charges, or late payment penalties.