Term

Definition
An important tool used in time value analysis; it is a graphical representation used to show the timing of cash flows. 


Term

Definition
The amount to which a cash flow or series of cash flows will grow over a period of time when compounded at a given interest rate. 


Term

Definition
The value today of a future cash flow or series of cash flows. 


Term

Definition
The arithmetic process of determining the final value of a cash flow or series of cash flows when compound interest is applied. 


Term

Definition
Occurs when interest is earned on prior periods' interest. 


Term

Definition
Occurs when interest is not earned on interest. 


Term

Definition
The rate of return you could earn on an alternative investment of similar risk. 


Term

Definition
The process of finding the present value of a cash flow or a series of cash flows; discounting is the reverse of compounding. 


Term

Definition
A series of equal payments at fixed intervals for a specified number of periods. 


Term
Ordinary (Deferred) Annuity 

Definition
An annuity whose payments occur at the end of each period. 


Term

Definition
An annuity whose payments occur at the beginning of each period. 


Term

Definition
The future value of an annuity over N periods. 


Term

Definition
The present value of an annuity of N periods. 


Term

Definition
A perpetual bond issued by the British government to consolidate past debts; in general, any perpetual bond. 


Term

Definition
A stream of equal payments at fixed intervals expected to continue forever. 


Term
Uneven (Nonconstant) Cash Flows 

Definition
A series of cash flows where the amount varies from one period to the next. 


Term

Definition
The term designates equal cash flows coming at regular intervals. 


Term

Definition
The term designates a cash flow that's not part of an annuity. 


Term

Definition
The arithmetic process of determining the final value of a cash flow or series of cash flows when interest is added once a year. 


Term

Definition
The arithmetic process of determining the final value of a cash flow or series of cash flows when interest is added twice a year. 


Term
Nominal (Quoted, or Stated) Interest Rate, Inom 

Definition
The contracted (or quoted or stated) interest rate. 


Term
Annual Percentage Rate (APR) 

Definition
The periodic rate times the number of periods per year. 


Term
Effective (Equivalent) Annual Rate (EFF% or EAR) 

Definition
The annual rate of interest actually being earned, as opposed to the quoted rate. Also called the "equivalent annual rate." 


Term

Definition
A loan that is repaid in equal payments over its life. 


Term

Definition
A table showing precisely how a loan will be repaid. It gives the required payment date and a breakdown of the payment, showing how much interest and how much is repayment of principal. 

