Finance Ch 4

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Anonymous
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72269
Filename:
Finance Ch 4
Updated:
2011-03-11 13:38:08
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Finance Time Value Money
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Finance Time Value of Money
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  1. The beginning value of an account or investment in a project is ___ value.
    Present
  2. The difference between a savings account's present value and its future value at the end of the period is due to the ___ earned during the period.
    Interest
  3. The process of finding present values is also called?
    Discounting
  4. The reverse process of discounting is?
    Compounding
  5. A series of payments of constant amount over a specified number of periods is called?
    Annuity
  6. Payments made on an annuity at the end of a period is call a ___ annuity.
    Ordinary
  7. Payments of an annuity due at the beginning of a period is called an annuity ___.
    Due
  8. The present value of an uneven stream of future payments is the ___ of the PV's of the individual payments.
    Sum
  9. The quoted interest rate is called ___ while the ___ annual interest rate is needed when compounding is involved.
    • Nominal
    • Effective
  10. The ___ ___ is one of the most important tools in time value calculations. It helps visualizing what is happening.
    Time Line
  11. An annuity that goes on forever is called?
    Perpetuity
  12. ___ loans are paid off in equal installments over time.
    Amortized
  13. The breakdown of each loan payment as partly interest and partly principal is called?
    Amortization Schedule
  14. The ___ cost rate is the rate of return that could be earned on an alternative investment.
    Opportunity
  15. The term for equal cash flows coming in at regular intervals is called?
    Payments
  16. ___ ___ is the term designated for uneven cash flows.
    Cash Flow
  17. The ___ annual rate is the rate that would have produced the same future value under annual compounding as would more frequent compounding at a given nominal rate.
    Effective

    [1 + (Inominal / M)]M - 1

    M = number of compounding periods
  18. The ___ percentage rate is the periodic rate times the number of periods per year.
    Annual
  19. The value of a business (or any assets or stock) is the ___ value of its expected future cash flows.
    Present
  20. The future value of an uneven cash flow stream is also know as its ___ value
    Terminal
  21. If a loan uses ___ compounding, then its nominal rate equals its effective rate.
    Annual
  22. ___ time periods are used when payments occur within periods instead at either the beginning or end.
    Fractional
  23. A ___ ___ is defined as a series of payments that increase at a constant rate.
    Growing Annuity

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