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Money and its Management - Coggle Diagram
Money and its Management
Amortized Loans
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Ex. loans for automobiles, appliances, mortgages
Amortized Installment
The amount of interest owed for a specified period is calculated on the basis of the remaining balance on the loan at the beginning of the period.
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Interest Payment
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In = A(P/A, i, N - n + 1)(i)
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Mortgages
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A mortgage is a legal document in which the borrower agrees to give the lender certain rights to the property being purchased as security for the loan.
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Reverse mortgage
Allows a homeowner 55 years old and up to convert up to 50% of the equity in their home into tax-free cash at a higher interest rate without having to sell their home or pay additional monthly bills. The owner does not have to make payments until they move or die.
Second mortgage
Allows a homeowner of any age to convert part of the equity in their home into tax-free cash at a higher interest rate. The owner begins making payments on the second mortgage immediately.
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Term of the mortgage
A mortgage is comprised of many ‘terms’ where the interest rate is fixed. After a term has passed, the mortgage can be renegotiated and the rates can change.
Equity
Equity is the ownership of any asset after any liabilities associated with the asset are cleared. For example, the equity of a property is the value remaining after all mortgage and loans are subtracted.
Bonds
Special type of loan where the creditor pays a stated amount of interest at specified intervals for a defined period and repays the principal at a specific date, known as the maturity date of the bond.
Creditors are usually big companies or the federal, provincial, or local governments.
Par value/face value: the principal, which the issuer pays at the time of maturity
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Call or redemption feature: the issuer reserves the right to pay-off the bond before its maturity date
Bond prices change over time because of the risk of nonpayment of interest or par value, supply and demand, and the economic outlook.
Yield to maturity: the total expected return for an investor if the bond is held to maturity. the compound interest rate that establishes the equivalence between all future interest and face-value payments and the market price.
Current yield: amount of interest earned in one period divided by the current market price as a percentage
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