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Definition
| an economic principle stating that dollars to be received or paid out through time are different commodities that cannot simply be added or subtracted from each other |
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| you can use dollars today that you have today. dollars you get in the future you have to wait to use |
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| the trading of dollars today to get dollars in the future |
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Definition
| the trading of dollars in the future for dollars today |
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Definition
| the process of turning future cash flows into current cash flows |
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Definition
| the process of turning current cash flows into future cash flows |
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Definition
| a way to view the process of discounting and compounding dollars through time. Discounting is the process of pulling cash flows left, compounding is pulling them right |
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| the dollar amount of interest received on the original investment only |
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Definition
| the dollar amount of interest earned not only in the original principal but also on interest earned over previous periods |
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| effective annual interest rate |
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Definition
| an interest rate expressed as if it were earned once per year |
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Definition
| another name for the interest rate. because the discount is to deduct, the discount rate is used to reduce a future value to a present value |
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Definition
| more than one cash flow, as opposed to a lump-sum cash flow |
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Definition
| a series of equal cash flows to be received through time |
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Term
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Definition
| an annuity with a first payment occurring at the beginning of period one |
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