Home > Flashcards > Print Preview
The flashcards below were created by user
SummerXParadise
on FreezingBlue Flashcards. What would you like to do?

Opportunity Cost
Proceeds lost by forgoing other opportunities

Future Value (FV)
When an amount invested today will be worth at a given time in the future using the compound interest method, which accounts for the time value of money

Time Value of money
The concept that a dollar received today is worth more than a dollar received in the future

Simple interest method
A method in which interest is calculated only on the original principal. The principal is the amount invested

Compound interest method
A method in which interest is calculated on both the original principal and on all interest accumulated since the beginning of the investment time period

Future value table
Table of factors that shows the future value of a single investment at a given interest rate

Present Value (PV)
The value today of a payment to be received in the future, taking into account the cost of capital. (sometimes call discount rate).

Compounding
Converting a present value into its future value taking into account the time value of money. It is the opposite of discounting

Discounting
Converting future cash flows into their present value taking into account the time value of the money

Annuity
A series of equal payments made or received at regular time intervals

Future value of an annuity
What an equal series of payments will be worth at some future date using compound interest

Future Value Factor of an Annuity (FVFA)
A factor that when multiplied by a stream of equal payments equals the future value of that stream

Future value of an annuity table
Table of factors that shows the future value of equal flows at the end of each period, given a particular interest rate

Ordinary Annuity
A series of equal annuity payments made or received at the end of each period

Annuity Due
A series of equal annuity payments made or received at the beginning of each period

Present value of an annuity
What a series of equal payments in the future is worth today taking into account the time value of the money

Perpetuity
An annuity for an infinite period of time

Present Value Table
Table of factors that shows what a single amount to be received in the future is worth today at a given interest rate

Present value of an ordinary annuity table
Table of factors that shows the value today of equal flows at the end of each future period, given a particular interest rate

