Glossary

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

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.

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.

The balance in an account plus any accrued interest.

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

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.

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

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.

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

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.

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.

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

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

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

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 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.

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

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

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

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

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

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

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

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

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