Topic 1 terminology Flashcards
1
Q
The rates quoted by financial
institutions and used for discounting or compounding
cash flows, r
A
Nominal Interest Rate
2
Q
The rate of growth of your
purchasing power, after adjusting for inflation, rr
A
Real Interest Rate
3
Q
indicates the amount of
simple interest earned in one year
A
Annual Percentage Rate (APR)
4
Q
is the amount of interest earned without the effect of
compounding
A
simple interest
5
Q
indicates the total amount
of interest that will be earned at the end of one year
A
Effective Annual Rate (EAR)
6
Q
is the one interest rate that sets the net
present value of the cash flows equal to zero
A
Internal Rate of Return (IRR)
7
Q
is a level stream of regular payments that last for a
fixed number of periods
A
annuity
