Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Discounting A 6% return that you could have earned if you had made a particular investment Time value of money A series of equal (constant)
Discounting A 6% return that you could have earned if you had made a particular investment Time value of money A series of equal (constant) cash flows (receipts or payments) that are expected to continue forever Amortized loan The concept that states that the timing of the receipt or payment of a cash flow will affect its value to the holder of the cash flow Ordinary annuity A value that represents the interest paid by borrowers or earned by lenders, expressed as a percentage of the amount borrowed or invested over a 12-month period Annual percentage rate A process that involves calculating the current value of a future cash flow or series of cash flows based on a certain interest rate Annuity due A cash flow stream that is created by an investment or loan that requires its cash flows to take place on the last day of each quarter and requires that it last for 10 years Perpetuity A series of equal cash flows that occur at the beginning of each of the equally spaced intervals (such as daily, monthly, quarterly, and so on) Future value The name given to the amount to which a cash flow, or a series of cash flows, will grow over a given period of time when compounded at a given rate of interest Amortization schedule A loan in which the payments include interest as well as loan principal Opportunity cost of funds A schedule or table that reports the amount of principal and the amount of interest that make up each payment made to repay a loan by the end of its regular term Time value of money calculations can be solved using a mathematical equation, a financial calculator, or a spreadsheet. Which of the following equations can be used to solve for the present value of a lump sum? FV/(1 + r)^n PV times (1 + r)^n PMT times {1 - [1/(1 + r)^n]}/r PMT/r
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started