Glossary

Any interest amount that has been calculated but not yet placed (charged or earned) into an account.

A process by which the principal of a loan is extinguished over the course of an agreed-upon time period through a series of regular payments that go toward both the accruing interest and principal reduction. amortization period The length of time it will take for the principal of a loan to be reduced to zero.

A table that shows the payment amount, principal component, interest component, and remaining balance for every payment in the annuity. amortization term The length of time for which the interest rate and payment agreement between the borrower and the lender will remain unchanged.

A continuous stream of equal periodic payments from one party to another for a specified period of time to fulfill a financial obligation.

Annuity payments that are each made at the beginning of a payment interval.

The dollar amount of the equal periodic payment in an annuity environment.

The total change of the function values (output values) divided by the change in the input values

The level of production where revenue equals cost; the minimum level of sales necessary for a company to make a profit

a financial calculation that weighs the costs of a new business, service or product against the unit sell price to determine the point at which you will break even

A type of mortgage that has many strict rules and does not allow the mortgager to pay off the debt in full until the loan matures. Early payment incurs substantial penalties.

A short-term financial instrument with maturity no longer than one year that is issued by large corporations.

A system for calculating interest that primarily applies to long-term financial transactions with a time frame of one year or more; interest is periodically converted to principal throughout a transaction, with the result that the interest itself also accumulates interest.

A GIC that uses compound interest rates for which interest is periodically calculated and converted to the principal of the GIC for further compounding.

Called C-bonds, these bonds annually convert the interest on the savings bond to principal.

The amount of time that elapses between the dates of successive conversions of interest to principal.

A system of equations that has at least one solution

A value, r, between -1 and 1; r > 0 suggests a positive (increasing) relationship; r < 0 suggests a negative (decreasing) relationship

An outlay of money required to produce, acquire, or maintain a product, which includes both physical goods and services.

A promotion that entitles a consumer to receive certain benefits, usually in the form of a reduction of the selling price for a product.

A handling charge that is paid to channel members for redeeming a coupon.

The expense associated with creating, distributing, and redeeming a coupon.

The face value price reduction offered by a coupon.

The balance in an account plus any accrued interest.

A financial transaction where annuity payments are delayed until a certain period of time has elapsed.

A consistent system in which the equations represent the same line; has infinite solutions

A reduction in the price of a product.

An interest rate used to remove interest from a future value.

The set of possible input values to a function

The true annually compounded interest rate that is equivalent to an interest rate compounded at some other (non-annual) frequency.

Interest rates with different compounding that produce the same effective rate and therefore are equal to each other.

Equating two or more alternative financial streams such that neither party receives financial gain or harm by choosing either stream.

Two payments that have the same value on the same day factoring in a fair interest rate.

A GIC that uses compound interest rates that usually remain constant during each of a series of time intervals, always rising stepwise throughout the term of the investment with any accrued interest being converted to principal.

A business’s financial outlays incurred in the selling of a product.

When we predict a value outside the domain and range of the data

The maturity value of a T-bill, which is payable at the end of the term. It includes both the principal and interest together.

The set of possible solutions to a system as shown on a graph

Startup costs, such as those for equipment and buildings

An interest rate that is unchanged for the duration of the transaction.

A point in time to which all monies involved in all payment streams will be moved using time value of money calculations.

A rule for a relationship between an input, or independent, quantity and an output, or dependent, quantity in which each input value uniquely determines one output value.  We say “the output is a function of the input.”

The notation output = f(input) defines a function named f.  This would be read “output is f of input”

Two or more payment streams are equal to each other if they have the same economic value on the same focal date.

The amount of principal with interest at a future point of time for a financial transaction. If this future point is the same as the end date of the financial transaction, it is also called the maturity value.

An annuity in which the payment interval does not equal the compounding interval (P/Y does not equal C/Y).

An annuity where payments are made at the beginning of the payment intervals and the payment and compounding frequencies are unequal. The first payment occurs on the same date as the beginning of the annuity, while the end of the annuity is one payment interval after the last payment.

An investment that offers a guaranteed rate of interest over a fixed period of time.

A point at which a line intersects the horizontal axis of a graph. If it exists in a function, it can always be found by solving f(x) = 0.

A system of equations in which the equations represent two parallel lines; has no solution

A consistent system in which the equations represent lines that intersect only once; has exactly one solution

The dollar amount of interest that is paid or earned.

A GIC where the interest is periodically paid out to the investor, but it is never added to the principal of the GIC. Because the interest does not actually compound, in essence the concepts of simple interest are used.

The rate of interest that is charged or earned during a specified time period.

When we predict a value inside the domain and range of the data

A function whose graph produces a line.  Linear functions can always be written in the form f(x) = b + mx or f(x) = mx + b, where b is the initial/starting value of the function (when x = 0), and m is the constant rate of change of the function.

A price for a product that has been published or advertised in some way.

a variable used to represent a number.

The number the variable represents can be either known or unknown. It can be our usual x or y, or it can be other letters, such as a, b, or c.

The local maxima and minima of a function (also called ‘local extreme values’)

A point where a function changes from increasing to decreasing.

A point where a function changes from decreasing to increasing.

A discount given from a seller to a purchaser for repeat business.

A refund that occurs after a product has been purchased.

The average level of markup that is maintained across all units sold at various price levels including the selling price and the sale price(s).

A recommended product retail price that a manufacturer sets for a retailer based on market research.

The change in total cost if the quantity of items produced increases by one.

The change in total profit if the quantity of items produced increases by one.

The change in total revenue if the quantity of items produced increases by one.

A reduction from the regular selling price of a product resulting in a new lower sale price.

Any marketing activity executed by a member of the distribution channel for the purposes of altering a product’s price.

The process of taking a product’s cost and increasing it by a certain amount to arrive at a selling price.

The dollar amount of the expenses and profit combined together into a single number; it represents the difference between the price and cost in dollars.

The markup dollars expressed as a rate using cost as the base.

The markup dollars expressed as a rate using the regular selling price as the base.

The date upon which a transaction, such as a promissory note, comes to an end and needs to be repaid.

The amount of money at the end of a transaction, which includes both the interest and the principal together.

The financial institution that lends the money for a mortgage.

The individual or business that borrows the money for a mortgage.

A special type of loan that is collaterally secured by real estate property.

The price of the product after a discount is removed from the list price.

A nominal number for the annual interest rate, which is commonly followed by words that state the compounding frequency.

A function whose value we either want to be as large as possible (want to maximize it) or as small as possible (want to minimize it)

A type of mortgage that has very few rules and allows the mortgagor to pay off the debt in full or with additional prepayments at any given point without penalty.

An annuity in which the payment interval does not equal the compounding interval, and payments are made at the end of the term.

An annuity where payments are made at the end of the payment intervals and the payment and compounding frequencies are unequal. The first payment occurs one interval after the beginning of the annuity, while the last payment is on the same date as the end of the annuity.

An annuity in which the payment interval equals the compounding interval, and payments are made at the term.

An annuity where payments are made at the end of the payment intervals and the payment and compounding frequencies are equal. The first payment occurs one interval after the beginning of the annuity while the last payment is on the same date as the end of the annuity.

Two lines with the same rates of change (same slopes); will never cross

Amortization schedules that show only a specified range of payments and not the entire annuity.

The number of annuity payments in a complete year.

The amount of time between each continuous and equal annuity payment.

The time segment of a deferred annuity where the single payment earns interest and no contributions are made to the investment.

The percentage of interest earned or charged at the end of each compounding period.

Two lines wherein the slope of one line is the negative reciprocal of the other line’s slope; form a 90 degree angle at the point where they meet

A function in which the formula used depends upon the domain the input lies in.

The amount of money at the beginning of a time period in a transaction. If this is in fact the amount at the start of the financial transaction, it is also called the principal. Or it can simply be the amount at some time earlier before the future value was known. In any case, the amount excludes the interest.

The sum of all the present values for all of the annuity payments when they are moved to the beginning of the first payment interval.

The present value of all payments on a loan is equal to the principal that was borrowed.

The original amount of money that is borrowed or invested in a financial transaction.

The amount of money that remains after a business pays all of its costs and expenses.

A promissory note is a written promise by one party to pay an amount of money to another party on a specific date, or on demand.

A discount for purchasing larger quantities of a certain product.

The set of possible output values of a function

How the output quantity changes in relation to the input quantity. The units on a rate of change are “output units per input units”

The expense associated with creating, distributing, and redeeming a rebate.

The face value amount that a consumer will receive as a refund if a submitted rebate fulfills all rebate conditions.

A table that details the financial transactions in an account, including the balance, interest amounts, and payments.

The amount of money a company brings in from sales

A temporary discount lowering the price from a product’s regular selling price.

A price for a product after a markdown that is lower than its regular selling price.

A deposit account that bears interest and has no stated maturity date.

A discount offered to consumers and businesses for purchasing products out of season.

An annuity in which the payment interval equals the compounding interval (P/Y equals to C/Y).

An annuity in which the payment frequency and compounding frequency are equal.

An annuity where payments are made at the beginning of the payment intervals and the payment and compounding frequencies are equal. The first payment occurs on the same date as the beginning of the annuity, while the end of the annuity is one payment interval after the last payment.

A system for calculating interest that primarily applies to short-term financial transactions with a time frame of less than one year.

A single discount rate that is equal to a series of multiple rate discounts.

The constant rate of change of a function (the m in f(x) = mx + b)

A marketable bond that has been stripped of all interest payments.

A set of two or more equations made up of two or more variables such that all equations in the system are considered simultaneously; the solution is a set of numerical values for each variable in the system that will satisfy all the equations in the system at the same time

The length of the financial transaction for which interest is charged or earned. It may also be called the term.

A discount offered to businesses only based on the type of business and its location in the distribution system.

Short-term financial instruments with maturities no longer than one year that are issued by both federal and provincial governments.

Costs that depend on the number of items produced, such as materials and labour

An interest rate that is open to fluctuations over the duration of a transaction.

A point at which a line intersects the vertical axis of a graph (the b in f(x) = mx + b)

If any vertical line would cross a graph more than once, then the graph does not define only one vertical output for each horizontal input.

The percentage increase between the sale price and redemption price on an investment such as a T-bill or commercial paper.