Investments and Loans Flashcards
Define
Future Value
The value of the investment at a given point in the future, usually calculated via compound interest.
Formula
Future Value
FV = PV(1+r)^n
Future Value = Present Value x (1+rate)^number of periods
Formula
PV =
PV = FV/(1+r)^n
Present Value = Future Value / (1+rate)^number of periods
Define
Cost Price / Issued
Price
The amount paid to purchase a share.
Define
Market Price
The current value of a share.
Define
Face Value
The initial price of a share.
Define
Dividend
The profit distributed to the shareholders when a company makes a profit. This is paid either as a percentage of the value of the market share or a set amount per share. Dividends are paid twice per year, known as the interim and final dividend.
Define
Dividend Yield
The annual rate of return for a share, expressed as a percentage of the share’s market value. It is calculated by dividing the annual dividend by the market share price and then multiplying by 100%.
Formula
Dividend Yield =
Dividend Yield = Annual Dividend / Market Price × 100%
Formula
Dividend per Share =
Dividend per Share = Dividend Yield x Market Price
Formula
Declining balance depreciation
S = V(1-r)^n
Salvage = Purchase price x (1 - Rate)^Number of time periods
Define
Reducing Balance Loans
Loans with a balance that reduces at an increasing rate as payments are made. This is because the amount of interest reduces as the loan progresses.
Formula
Total to be paid
Loans
Total to be paid = Loan payment × number of repayments
Definition
Interest Free Period
The period of time for which no interest is charged on a credit card purchase.
