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TBFSI Finance > Chapter 9 > Flashcards

Chapter 9 Flashcards

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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
Q

Annual Compounding

A

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.

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26
Q

Semiannual Compounding

A

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.

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27
Q

Simple (Quoted) Interest Rate

A

The rate quoted by borrowers and lenders that is used to determine the rate earned per compounding period (periodic rate, rper)

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28
Q

Annual Percentage Rate (APR)

A

Another name for the simple interest rate, rsimple; does not consider the effect of interest compounding.

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29
Q

Effective (Equivalent) Annual Rate (R-ear)

A

The annual rate of interest actually being earned, as opposed to the quoted rate, considering the compounding of interest.

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30
Q

Amortized Loans

A

A loan that requires equal payments over its life; the payments include both interest and repayment of the debt.

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31
Q

Amoritization Schedule

A

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.

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32
Q

Effective Annual Rate (EAR) Equation

A

[1+(r-simple)/m)^m -1

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33
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.

How well did you know this?
1
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2
3
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5
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34
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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35
Q

Opportunity Cost Rate

A

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

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36
Q

Lump-Sum Amount

A

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

37
Q

Annuity

A

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

38
Q

Ordinary Annuity

A

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

39
Q

Annuity Due

A

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

40
Q

Uneven Cash Flows

A

Multiple payments of different amounts over a period of time.

41
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.

42
Q

Compound Interest

A

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

43
Q

Cash Outflow

A

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

44
Q

Cash Inflow

A

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

45
Q

Lump-Sum Equation

A

FVn= PV (1+r)^n

46
Q

Ordinary Annuity Equation

A

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

47
Q

Anuity Due Equation

A

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

48
Q

Payment (PMT)

A

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

49
Q

Cash Flow (CF)

A

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

50
Q

Terminal Value

A

The future value of a cash flow stream.

51
Q

Futre Value Cash Flow Equation

A

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

52
Q

Present Value (PV)

A

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

53
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.

54
Q

Perpetuity

A

A stream of equal payments expected to continue forever.

55
Q

Consols

A

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

56
Q

Annual Compounding

A

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
Q

Semiannual Compounding

A

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
Q

Simple (Quoted) Interest Rate

A

The rate quoted by borrowers and lenders that is used to determine the rate earned per compounding period (periodic rate, rper)

59
Q

Annual Percentage Rate (APR)

A

Another name for the simple interest rate, rsimple; does not consider the effect of interest compounding.

60
Q

Effective (Equivalent) Annual Rate (R-ear)

A

The annual rate of interest actually being earned, as opposed to the quoted rate, considering the compounding of interest.

61
Q

Amortized Loans

A

A loan that requires equal payments over its life; the payments include both interest and repayment of the debt.

62
Q

Amoritization Schedule

A

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
Q

Effective Annual Rate (EAR) Equation

A

[1+(r-simple)/m)^m -1

64
Q

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

A

Cash Flow Timeline

65
Q

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

A

Opportunity Cost Rate

66
Q

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

A

Lump-Sum Amount

67
Q

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

A

Annuity

68
Q

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

A

Ordinary Annuity

69
Q

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

A

Annuity Due

70
Q

Multiple payments of different amounts over a period of time.

A

Uneven Cash Flows

71
Q

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

A

Future Value (FV)

72
Q

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

A

Compound Interest

73
Q

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

A

Cash Outflow

74
Q

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

A

Cash Inflow

75
Q

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

A

Payment (PMT)

76
Q

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

A

Cash Flow (CF)

77
Q

The future value of a cash flow stream.

A

Terminal Value

78
Q

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

A

Present Value (PV)

79
Q

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.

A

Discounting

80
Q

A stream of equal payments expected to continue forever.

A

Perpetuity

81
Q

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

A

Consols

82
Q

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.

A

Annual Compounding

83
Q

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.

A

Semiannual Compounding

84
Q

The rate quoted by borrowers and lenders that is used to determine the rate earned per compounding period (periodic rate, r-per)

A

Simple (Quoted) Interest Rate

85
Q

Another name for the simple interest rate, rsimple; does not consider the effect of interest compounding.

A

Annual Percentage Rate (APR)

86
Q

The annual rate of interest actually being earned, as opposed to the quoted rate, considering the compounding of interest.

A

Effective (Equivalent) Annual Rate (R-ear)

87
Q

A loan that requires equal payments over its life; the payments include both interest and repayment of the debt.

A

Amortized Loans

88
Q

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.

A

Amoritization Schedule

TBFSI Finance (5 decks)

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