ch 5 intro to valuation: the time value of money Flashcards
1
Q
future value
A
amount of money to which an investment would grow over some length of time at some given interest rate
2
Q
compounding
A
the process of leaving your money and any accumulated interest in an investment for more than one period, thereby reinvesting the interest
3
Q
present value
A
the current value of future cash flows discounted at the appropriate discount rate
4
Q
basic PV equation
A
PV = FV/ (1 + r)^t
5
Q
rule of 72
A
shortcut of the rule of thumb used to estimate the number of years required to double your money at a given annual rate of return
72/interest rate
