# Chapter 10: Glossary of Terms

# Glossary of Terms

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.

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

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

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.

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 marketable bond that has been stripped of all interest payments.