Time value of money (TMV)

Question 1

Future Value (FV)

Answer 1

Amount of cash that accrued on a given date due to a previous lump sum or periodic investments

Question 2

Present Value (PV)

Answer 2

Value of an investment at the beginning of the period (Principal amount)

PV of a monetary unit is worth more today than the same currency in the future

Question 3

I/Y Rate

Answer 3

Interest rate

Question 4

Payment/Cash flow (PMT)

Answer 4

Periodic investments or installments made
May occur at the beginning or end of YOA

Question 5

Period (N)

Answer 5

Number of periods for which the investment must receive interest

Question 6

Real rate

Answer 6

Nominal rate - Inflation

Question 7

Nominal rate

Answer 7

Real rate + Inflation

Question 8

Perpetuity

Answer 8

PV = PMV/i
i = %/100/div period

Question 9

Growing perpetuity

Answer 9

Something that goes on indefinitely in the future, coupled with constant growth rate

Question 10

Growing perpetuity Formula

Answer 10

[PMT(1 + g)]/(r - g)

Question 11

Compounding

Answer 11

Process of calculating the FV of an investment made today or a series of investments made over a period of time

Question 12

Discounting

Answer 12

Process to reduce the FV of a cash flow to its (smaller) current value