Chapter 9 Flashcards

(88 cards)

1
Q

he principles and computations used to revalue cash paoffs at different times so they are stated in dollars of the same time period; used to convert dollars from one time period to those of another time period.

A

Time Value of Money (TVM)

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2
Q

Time Value of Money (TVM)

A

The principles and computations used to revalue cash paoffs at different times so they are stated in dollars of the same time period; used to convert dollars from one time period to those of another time period.

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3
Q

Cash Flow Timeline

A

An important tool used in time value of money analysis; a graphical representation used to show the timing of cash flows.

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4
Q

Opportunity Cost Rate

A

The rate of return on the best available alternative investments of equal risk.

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5
Q

Lump-Sum Amount

A

A single payment (received or made) that is made either today or at some date in the future.

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6
Q

Annuity

A

A series of payments of equal amounts at fixed, equal intervals for a specified number of periods.

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7
Q

Ordinary Annuity

A

An annuity with payments that occur at the end of each period.

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8
Q

Annuity Due

A

An annuity with payments that occur at the beginning of each period.

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9
Q

Uneven Cash Flows

A

Multiple payments of different amounts over a period of time.

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10
Q

Future Value (FV)

A

The amount to which a cash flows will grow over a given period of time when compounded at a given interest rate.

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11
Q

Compound Interest

A

When interest is left in an investment to earn additional interest.

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12
Q

Cash Outflow

A

A payment, or disbursement, of cash for expenses, investments, and so forth.

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13
Q

Cash Inflow

A

A receipt of cash from an investment, an employer, or other sources.

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14
Q

Lump-Sum Equation

A

FVn= PV (1+r)^n

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15
Q

Ordinary Annuity Equation

A

FVAn= PMT [(((1+r)^n) -1))/r]

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16
Q

Anuity Due Equation

A

FVA(due)n=PMT{[(1+r)^(n-1)/4] x (1+r)}

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17
Q

Payment (PMT)

A

This term designates constant cash flows– that is, the amount of an annuity payment.

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18
Q

Cash Flow (CF)

A

This term designates constant cash flows in general, including uneven cash flows.

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19
Q

Terminal Value

A

The future value of a cash flow stream.

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20
Q

Futre Value Cash Flow Equation

A

CF1(1+r)^(n-1) + CF2 (1+r)^(n-2)_

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21
Q

Present Value (PV)

A

The value todeay– that is, the current value– of a future cash flow or series of cash flows.

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22
Q

Discounting

A

The process of determining the present value of a cash flow or a series of cash flows received (paid)in the future; the reverse of compounding.

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23
Q

Perpetuity

A

A stream of equal payments expected to continue forever.

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24
Q

Consols

A

Perpetual bonds issued by the British government to consolidate past debts; in general, any perpituital bond.

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25
Annual Compounding
The process of determining the future (of present) value of a cash flow or series of cash flows when interest is paid once per year.
26
Semiannual Compounding
The process of determining the future (or present) value of a cash flow or series of cash flows when interest is paid twice per year.
27
Simple (Quoted) Interest Rate
The rate quoted by borrowers and lenders that is used to determine the rate earned per compounding period (periodic rate, rper)
28
Annual Percentage Rate (APR)
Another name for the simple interest rate, rsimple; does not consider the effect of interest compounding.
29
Effective (Equivalent) Annual Rate (R-ear)
The annual rate of interest actually being earned, as opposed to the quoted rate, considering the compounding of interest.
30
Amortized Loans
A loan that requires equal payments over its life; the payments include both interest and repayment of the debt.
31
Amoritization Schedule
A schedule shortening precisely how a loan will be repaid. It gives the required payment date and a breakdown of the payment, showing how much is interest and how much is repayment of principal.
32
Effective Annual Rate (EAR) Equation
[1+(r-simple)/m)^m -1
33
Time Value of Money (TVM)
The principles and computations used to revalue cash paoffs at different times so they are stated in dollars of the same time period; used to convert dollars from one time period to those of another time period.
34
Cash Flow Timeline
An important tool used in time value of money analysis; a graphical representation used to show the timing of cash flows.
35
Opportunity Cost Rate
The rate of return on the best available alternative investments of equal risk.
36
Lump-Sum Amount
A single payment (received or made) that is made either today or at some date in the future.
37
Annuity
A series of payments of equal amounts at fixed, equal intervals for a specified number of periods.
38
Ordinary Annuity
An annuity with payments that occur at the end of each period.
39
Annuity Due
An annuity with payments that occur at the beginning of each period.
40
Uneven Cash Flows
Multiple payments of different amounts over a period of time.
41
Future Value (FV)
The amount to which a cash flows will grow over a given period of time when compounded at a given interest rate.
42
Compound Interest
When interest is left in an investment to earn additional interest.
43
Cash Outflow
A payment, or disbursement, of cash for expenses, investments, and so forth.
44
Cash Inflow
A receipt of cash from an investment, an employer, or other sources.
45
Lump-Sum Equation
FVn= PV (1+r)^n
46
Ordinary Annuity Equation
FVAn= PMT [(((1+r)^n) -1))/r]
47
Anuity Due Equation
FVA(due)n=PMT{[(1+r)^(n-1)/4] x (1+r)}
48
Payment (PMT)
This term designates constant cash flows-- that is, the amount of an annuity payment.
49
Cash Flow (CF)
This term designates constant cash flows in general, including uneven cash flows.
50
Terminal Value
The future value of a cash flow stream.
51
Futre Value Cash Flow Equation
CF1(1+r)^(n-1) + CF2 (1+r)^(n-2)_
52
Present Value (PV)
The value todeay-- that is, the current value-- of a future cash flow or series of cash flows.
53
Discounting
The process of determining the present value of a cash flow or a series of cash flows received (paid)in the future; the reverse of compounding.
54
Perpetuity
A stream of equal payments expected to continue forever.
55
Consols
Perpetual bonds issued by the British government to consolidate past debts; in general, any perpituital bond.
56
Annual Compounding
The process of determining the future (of present) value of a cash flow or series of cash flows when interest is paid once per year.
57
Semiannual Compounding
The process of determining the future (or present) value of a cash flow or series of cash flows when interest is paid twice per year.
58
Simple (Quoted) Interest Rate
The rate quoted by borrowers and lenders that is used to determine the rate earned per compounding period (periodic rate, rper)
59
Annual Percentage Rate (APR)
Another name for the simple interest rate, rsimple; does not consider the effect of interest compounding.
60
Effective (Equivalent) Annual Rate (R-ear)
The annual rate of interest actually being earned, as opposed to the quoted rate, considering the compounding of interest.
61
Amortized Loans
A loan that requires equal payments over its life; the payments include both interest and repayment of the debt.
62
Amoritization Schedule
A schedule shortening precisely how a loan will be repaid. It gives the required payment date and a breakdown of the payment, showing how much is interest and how much is repayment of principal.
63
Effective Annual Rate (EAR) Equation
[1+(r-simple)/m)^m -1
64
An important tool used in time value of money analysis; a graphical representation used to show the timing of cash flows.
Cash Flow Timeline
65
The rate of return on the best available alternative investments of equal risk.
Opportunity Cost Rate
66
A single payment (received or made) that is made either today or at some date in the future.
Lump-Sum Amount
67
A series of payments of equal amounts at fixed, equal intervals for a specified number of periods.
Annuity
68
An annuity with payments that occur at the end of each period.
Ordinary Annuity
69
An annuity with payments that occur at the beginning of each period.
Annuity Due
70
Multiple payments of different amounts over a period of time.
Uneven Cash Flows
71
The amount to which a cash flows will grow over a given period of time when compounded at a given interest rate.
Future Value (FV)
72
When interest is left in an investment to earn additional interest.
Compound Interest
73
A payment, or disbursement, of cash for expenses, investments, and so forth.
Cash Outflow
74
A receipt of cash from an investment, an employer, or other sources.
Cash Inflow
75
This term designates constant cash flows-- that is, the amount of an annuity payment.
Payment (PMT)
76
This term designates constant cash flows in general, including uneven cash flows.
Cash Flow (CF)
77
The future value of a cash flow stream.
Terminal Value
78
The value todeay-- that is, the current value-- of a future cash flow or series of cash flows.
Present Value (PV)
79
The process of determining the present value of a cash flow or a series of cash flows received (paid) in the future; the reverse of compounding.
Discounting
80
A stream of equal payments expected to continue forever.
Perpetuity
81
Perpetual bonds issued by the British government to consolidate past debts; in general, any perpituital bond.
Consols
82
The process of determining the future (of present) value of a cash flow or series of cash flows when interest is paid once per year.
Annual Compounding
83
The process of determining the future (or present) value of a cash flow or series of cash flows when interest is paid twice per year.
Semiannual Compounding
84
The rate quoted by borrowers and lenders that is used to determine the rate earned per compounding period (periodic rate, r-per)
Simple (Quoted) Interest Rate
85
Another name for the simple interest rate, rsimple; does not consider the effect of interest compounding.
Annual Percentage Rate (APR)
86
The annual rate of interest actually being earned, as opposed to the quoted rate, considering the compounding of interest.
Effective (Equivalent) Annual Rate (R-ear)
87
A loan that requires equal payments over its life; the payments include both interest and repayment of the debt.
Amortized Loans
88
A schedule shortening precisely how a loan will be repaid. It gives the required payment date and a breakdown of the payment, showing how much is interest and how much is repayment of principal.
Amoritization Schedule