Term

Definition
A series of payments or receipts (called rents) that occur at equal intervals. (p. 322). 


Term

Definition
An annuity in which each rent is payable/receivable at the beginning of the period. (p. 322). 


Term

Definition
Interest that accrues on both the principal and the interest earned in past periods (interest not withdrawn or paid out). (p. 312). 


Term

Definition
An annuity in which the rents begin after a specified number of periods. (p. 332). 


Term

Definition
The process of reducing the amounts or values of cash flows from the future to the present, making the present value less than the future amount. (p. 317). 


Term

Definition
The rate of interest the bondholders actually earn on a bond (and which takes into account the frequency of compounding). If bonds sell at a discount, the effective yield exceeds the stated rate; if bonds sell at a premium, the effective yield is lower than the stated rate. (p. 315). 


Term
effectiveinterest method 

Definition
The preferred procedure for computing the amortization of a discount or premium. Under this method, companies compute bond interest expense (revenue) at the beginning of the period by the effectiveinterest rate and then subtract bond interest paid (calculated as the face amount of the bonds times the stated interest rate); the result is the amortization amount. (p. 335). 


Term
expected cash flow approach 

Definition
Method of calculating present value that uses a range of cash flows and incorporates the probability of those cash flows to provide as accurate as possible measure of expected future cash flows. (p. 336). 


Term

Definition
The annual interest rate stated on a financial instrument. Also called nominal or stated rate. (p. 315). 


Term

Definition
Value at a later date of a single sum that is invested at compound interest. (p. 316). 


Term
future value of an annuity 

Definition
The accumulated total that results from a series of equal deposits (rents) invested at compound interest. (p. 322). 


Term

Definition
Payment for the use of someone elses money. It is the excess cash received/repaid over and above the amount lent/borrowed. (p. 311). 


Term

Definition
The annual interest rate stated on a financial instrument (a note or bond, for example). Also called face or stated rate. (p. 315). 


Term

Definition
An annuity in which each rent is payable/receivable at the end of the period. (p. 322). 


Term

Definition
The value at an earlier date (usually now) of a given future sum discounted at compound interest. (p. 316). 


Term

Definition
The amount borrowed or invested. (p. 311). 


Term

Definition
The pure (real) rate of return plus the expected inflation rate. Typically measured by the return on a lowrisk security (such as a 3month U.S. Treasury bill). (p. 337). 


Term

Definition
Interest on principal only, regardless of interest that may have accrued in past periods (compounded). (p. 312). 


Term

Definition
The annual interest rate stated on a financial instrument (a note or bond, for example). Also called face or nominal rate. (p. 315). 


Term

Definition
The relationship between time and money. A dollar received today is worth more than a dollar promised at some time in the future because of the opportunity to invest todays dollar and receive interest on the investment. (p. 310). 

