B.12 Time value of money concepts and calculations Flashcards

The concept that a sum of money has a different value today than it will at a future date due to its potential earning capacity.

The current value of a sum of money that will be received or paid in the future, discounted at a specific interest rate.

The value of a sum of money at a specified time in the future, assuming it earns a specific interest rate over time.

The interest rate used to calculate the present value of future cash flows.

The process of earning interest on both the initial principal and the accumulated interest from previous periods.

The process of determining the present value of a future amount by applying a discount rate.

A series of equal payments made at regular intervals over a specified period.

An annuity where payments are made at the end of each period.

An annuity where payments are made at the beginning of each period.

A type of annuity that provides indefinite payments, with no end date.

The difference between the present value of cash inflows and outflows over a specific period.

The discount rate that makes the net present value of all cash flows from a particular project equal to zero.

A formula used to estimate the number of years required to double an investment at a given annual rate of return by dividing 72 by the interest rate.

The annual rate of interest taking into account the effect of compounding over a given period.

The process of spreading out a loan into a series of fixed payments over time, where a portion of each payment is applied to both interest and principal.