# Finance Ch 4

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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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 Author: Anonymous ID: 72269 Filename: Finance Ch 4 Updated: 2011-03-11 18:38:08 Tags: Finance Time Value Money Folders: Description: Finance Time Value of Money Show Answers:

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