Module 4 - Concept of Present Value Flashcards
1
Q
Principal
A
sum of money borrowed or lent
2
Q
Simple interest equation
A
F = P (1 + rn)
3
Q
Discounting
A
process of calculating present value of income and expenditure which will be earned or paid at future dates
4
Q
Required rate of return
A
value of the investment to the investor
5
Q
Annuity
A
More than one receipt or payment of the same amount of money during an investment period
6
Q
What do cumulative discount factors assume
A
That repeated cashflows start from year 1 if not need to adjust
7
Q
What happens if the first payment or receipt occurs at once
A
Does not require to be discounted so do not include in formula and then add on to the end
8
Q
Pepetuity
A
A special case of annuity that runs indefinitely with no end to payments
