Effective Interest RateThe rate i such that an investment of 1 grows to 1+i at the end of one period. It reflects the actual growth per period after compounding.Nominal Interest RateA rate i^(m) that is compounded m times per year. The effective rate per compounding period is i^(m)/m. The effective annual rate is (1 + i^(m)/m)^m - 1.Force of InterestThe continuously compounded interest rate, denoted delta. Related to the effective rate by delta = ln(1+i). An accumulation over time t at constant force is e^(delta*t).Present ValueThe current worth of a future cash flow, obtained by discounting at the appropriate interest rate. PV = FV * v^n, where v = 1/(1+i) is the discount factor.Annuity-ImmediateA series of equal payments made at the end of each period. The present value of an n-period annuity-immediate is a_n = (1 - v^n) / i.Annuity-DueA series of equal payments made at the beginning of each period. The present value is a-double-dot_n = (1 - v^n) / d, where d = i/(1+i) is the discount rate.AmortizationThe process of repaying a loan through a series of payments that cover both interest and principal. Each payment reduces the outstanding balance until the loan is fully repaid.Macaulay DurationThe weighted average time to receipt of a bond s cash flows, using present values as weights. Measured in time units (years). Used to assess interest rate sensitivity.Modified DurationMacaulay duration divided by (1+y), where y is the yield per period. It approximates the percentage change in bond price for a small change in yield: dP/P is approximately equal to -D_mod * dy.ImmunizationA strategy to protect a portfolio against interest rate changes by matching the duration (and sometimes convexity) of assets and liabilities. Ensures the surplus is insensitive to small yield shifts.Put-Call ParityFor European options: C - P = PV(F) - PV(K), where C is the call price, P is the put price, F is the forward price, and K is the strike price. A fundamental no-arbitrage relationship.Forward RateThe interest rate agreed upon today for a loan that begins at a future date. The forward rate from time s to time t can be derived from spot rates: (1+s_t)^t = (1+s_s)^s * (1+f)^(t-s).