exam 2

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  1. effective yield
    the rate of intrest the bondholder actually earns on a bond. If sold at discount it exceeds the stated rate, if sold at a premium it is lower than the stated rate
  2. future value of an annuity
    the accumualted total that results from a series of equal deposits invested at compound intrest
  3. face rate (nominal/stated rate)
    the annual interest rate stated on a financial instrument.
  4. stated rate (face/ nominal rate)
    the annual intrest rate stated on a financial instrument
  5. ordinary annuity
    an annuity in which each rent is payable/ receivable at the end of the period
  6. simple intrest
    intrest on principla only regardless of intrest that may ahve occured in past periods
  7. principla
    the amount borrowed or invested
  8. dicounting
    the process of reducing the amount or values of cash flows from the future to the present, making the present value less than the future amount
  9. future value
    value at a later date of a single sum that is invested at compound intrest
  10. deferred annuity
    an annuity in which the rents begin after a specific number of periods
  11. effective intrest method
    the preferred procedure for computing the amortization of a discount or premium.
  12. nominal rate (face/ stated rate)
    the annual intrest rate stated on a financial instrument
  13. risk free rate of return
    the pure rate of return plus the expected inflation rate. typically meassured by the return on a low risk security
  14. expected cash flow approach
    method of caluculating present value that uses a range of cash flows and incorporates the probability of those cash flows to provide as accurate as apossible measure of expected future cash flows
  15. time value of money
    the relationship between time and money
  16. compound intrest
    intrest that accrues on both the principal and the intrest earned in past periods
  17. annuity due
    an annuity in which each rent is payable/ receivable at the beginning of the period
  18. annuity
    a series of payments or receipts that occur at equal intervals
  19. interest
    payment for the use of someone else's money. it is the excess cash received/ repaid over and above the amount lent/ borrowed
  20. present value
    the value at an earlier date of a given future sum discounted at compound intrest

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exam 2
2010-05-29 16:18:23

chap 6
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