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Definition
| The concept that a dollar received today is worth more than a dollar received in the future. Comparisons between sums in different periods cannot be made without adjustments to their value. |
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| Interest earned on interest. |
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| The face value of the deposit or debt instrument. |
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Definition
| The value of an investment at some point in time. PRESENT VALUE + INTEREST EARNED. |
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Definition
| The current value, that is, the value in today's dollars. |
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Definition
| Taking money that you earned on an investment and then re-investing it into that investment. FVn = FVn-1*(1+i). |
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Definition
| The interest is received at the end of of each year and then reinvested back into the investment; then, interest is earned on this new sum. |
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Definition
| A helpful investment rule that states that you can calculate how many years it will take for a sum to double by dividing its annual growth rate by 72. ANNUAL GROWTH RATE / 72 = YEARS TILL INVESTMENT DOUBLES. |
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Term
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Definition
| The interest rate used to bring future dollars back to the present. |
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Definition
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Term
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Definition
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Term
| Effective Annual Rate (EAR) |
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Definition
| (1 + i/m)^m - 1. Where m is the number of times the interest is compounded per year. |
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Term
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Definition
| A series of equal dollar payments coming at the end of each period for a specified number of periods. |
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Definition
| An investment that involves depositing an equal sum of money at the end of each year for a certain number of years and allowing it to grow. |
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Term
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Definition
| A loan paid off in equal installments. |
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Term
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Definition
| An annuity that continues forever. PV = PP / i. Where PP is the annual dollar amount provided by the perpetuity. |
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