Time Value of Money

Question 1

Accumulating

Discounting

Answer 1

Moving money forward in time

Moving money backward in time

Question 2

Accumulation factor
C x A(m,n)

Answer 2

C ( 1 + i ) ^n-m

Question 3

Discounting factor
C x A(m,n) ^ -1

Answer 3

C / (1 + i ) ^n-m

Question 4

Net Present Value

Answer 4

The total current value of all cashflows

At a given point in time

Question 5

v

Answer 5

1 / ( 1 + i )

Used for discounting

Question 6

Principle of Consistency

Answer 6

A(m,n) = A(m,k) x A(k,n)

Question 7

Effective rate of discount, d

Answer 7

i / ( 1 + i )

Question 8

d_1/p

Answer 8

1 - ( 1 - d ) ^1/p