Principal: Initial value of loan

Annuity: Series of equal payments made at equal intervals

• Ordinary Annuity: Payments are at end of each period
• Annuity Due: Payments are at beginning of each period
• Perpetuity: Annuity which continues forever

FVIFA: Future value of ordinary annuity with n periods, rate i, and payments of $1.

PVIFA: Present value of ordinary annuity with n periods, rate i, and payments of $1.

Balloon Loan: No/low payments due when loan is outstanding, balance due at maturity (?)

• Principal and interest are paid at end of the loan term

Amortized Loan: Borrower repays loan with level & regular periodic payments (?)

• Principal and interest are repaid with a series of constant payments at regular time intervals
• Each payment reduces principal owing ⇒ interest owing in next period

Car Leases: Amortized loan with lump-sum payment at end of loan term

• After lease is over, you have the option to walk away (pay no longer, lose the car) or buyout

Mortgage: Property as security