Discounting A process that involves calculating the current value of a future cash flow or series of cash flows based on a certain interest rate Time value of money A series of equal (constant) cash flows (receipts or payments) that are expected to continue forever Amortized loan A cash flow stream that is created by an investment or loan that requires its cash flows to take place on the last day of each quarter and requires that it last for 10 years Ordinary annuity A concept that maintains that the owner of a cash flow will value it differently, depending on when it occurs Annual percentage rate A schedule or table that reports the amount of principal and the amount of interest that make up each payment made to repay a loan by the end of its regular term Annuity due One of the four major time value of money terms; the amount to which an individual cash flow or series of cash payments or receipts will grow over a period of time when earning interest at a given rate of interest Perpetuity A type of security that is frequently used in mortgages and requires that the loan payment contain both interest and loan principal Future value A series of equal cash flows that occur at the beginning of each of the equally spaced intervals (such as daily, monthly, quarterly, and so on) Amortization schedule A 6% return that you could have earned if you had made a particular investment Opportunity cost of funds A value that represents the interest paid by borrowers or earned by lenders, expressed as a percentage of the amount borrowed or invested

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Dec 08, 2020

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