Chapter - 5 The Time Value Of Money Flashcards
1
Q
What is the time value of money?
A
the difference in value between a dollar in hand today and a dollar promised in the future; a dollar today is worth more than a dollar in the future
2
Q
What is time zero?
A
It is a term used to reflect the beginning of a transaction. It is the current point in time today.
3
Q
What is future value (FV)??
A
What the investment made will be worth after earning interest for one or more time periods.
4
Q
What is simple interest?
A
The amount of interest paid on soley the principle amount added together based on the time period.
5
Q
What is interest on interest?
A
It is the interest earned every year not on the principle balance but the principle balance added with the interest to it.
