Module 8 Flashcards
Use of
abbreviations
in math
equations.
formula notation
The notion that a dollar today is worth more than a dollar tomorrow.
time value of money
An illustration that shows financial events that happen at intervals.
timeline
A sum of money carried forward over one or more time periods with interest.
future value FV
An initial
deposit.
principal amount
Incoming and
outgoing cash.
cashflow CF
The percentage amount of the principal on deposit, paid as earnings.
interest rate
An interval
over which
interest is
accumulated.
time period
A type of interest when only the principal amount is considered.
simple interest
“Interest on
interest”.
compound interest
A factor from a financial table used to calculate the future value of a single cash flow over one or more periods.
future value interest factor FVIF
A financial table setting out interest rate factors by corresponding time periods to calculate what a principal amount will be at a future point.
future value table
The length of
time for interest
to compound.
investment horizon
The period of
time over
which interest
is calculated.
interest conversion period/ compounding period
The contracted or
posted interest rate
for a financial
instrument.
nominal insterest rate
The actual rate of interest being earned in a year after removing the impact of varying compounding periods.
effective annual rate EAR
A sum of money carried back over one or more time periods assuming a given interest rate.
present value PV
Interest rate
used in present
value
problems.
discount rate
A factor from a financial table used to calculate the present value of a single cash flow over one or more periods.
present value interest factor PVIF
A financial table setting out interest rate factors by corresponding time periods to calculate what a principal amount is needed today to achieve a desired amount in the future.
present value table
A series of cash flows with a specific start and end date, where all the cash flows are equal.
annuity
An annuity where the cash flows occur at the end of each period.
ordinary annuity
An annuity where
the cash flows occur
at the beginning of
each period.
annuity due
