Chapter 5 Flashcards by Deleted Deleted

Q

Interest earned on both the initial principal and the interest reinvested from prior periods

A

compound interest

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Q

The rate used to calculate the present value of future cash flows.

A

discount rate

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Q

a dollar in hand today is worth more than a dollar promised at some time in the future

A

time value of money

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Q

discount rate

A

The rate used to calculate the present value of future cash flows.

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Q

simple interest

A

Interest earned only on the original principal amount invested.

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Q

compounding

A

The process of accumulating interest on an investment over time to earn more interest.

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Q

Calculate the present value of some future amount.

A

discount

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Q

Interest earned on the reinvestment of previous interest payments.

A

interest on interest

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Q

discount

A

Calculate the present value of some future amount.

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Q

The process of valuing an investment by discounting its future cash flows.

A

discounted cash flow (DCF) valuation

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Q

compound interest

A

Interest earned on both the initial principal and the interest reinvested from prior periods

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Q

present value (PV)

A

The current value of future cash flows discounted at the appropriate discount rate.

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Q

future value (FV)

A

the amount of money an investment will grow to over some period of time at some given interest rate. Financing for new, often high-risk ventures.

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Q

Interest earned only on the original principal amount invested.

A

simple interest

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Q

The process of accumulating interest on an investment over time to earn more interest.

A

compounding

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Q

discounted cash flow (DCF) valuation

A

The process of valuing an investment by discounting its future cash flows.

Q

interest on interest

A

Interest earned on the reinvestment of previous interest payments.

Q

The current value of future cash flows discounted at the appropriate discount rate.

A

present value (PV)

Q

time value of money

A

a dollar in hand today is worth more than a dollar promised at some time in the future

Q

the amount of money an investment will grow to over some period of time at some given interest rate. Financing for new, often high-risk ventures.

A

future value (FV)