time value of money Flashcards
1
Q
future value=
A
how much an investment is worth after one or more periods
FV= original amount(1+r) ^t
2
Q
compounding:
A
the process of accumulating interest on an investment over time to earn more interest
3
Q
compound interest equation
A
original amount(1+interest rate)^years
4
Q
simple interest
A
original amount(1+interest rate x years)
5
Q
present value
A
the current value of future cash flows discounted at the appropriate discount rate
PV= value at the time / 1+ interest rate
6
Q
discounting=
A
refers to calculating the present value of a future amount
7
Q
A
