Finance, or financial management, requires the knowledge and precise use of the language of the field.

Match the terms relating to the basic terminology and concepts of the time value of money on the left with the descriptions of the terms on the right. Read each description carefully and type the letter of the description in the Answer column next to the correct term. These are not necessarily complete definitions, but there is only one possible answer for each term.

Term Answer Discounting A. Time value of money B. Amortized loan C. Ordinary annuity D. Annual percentage rate E. Description The process of determining the present value of a cash flow or series of cash flows to be received or paid in the future. A cash flow stream that is generated by a share of preferred stock that is expected to pay dividends every quarter indefinitely. 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. 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. 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. One of the four major time value of money terms; the amount to which an individual cash flow or series of cash payments or receipts will grow over a period of time when earning interest at a given rate of interest. A type of security that is frequently used in mortgages and requires that the loan payment contain both interest and loan principal. A cash flow stream that is created by a lease that requires the payment to be paid on the first of each month and a lease period of three years. A rate that represents the return on an investor's best available alternative investment of equal risk. An interest rate that reflects the return required by a lender and paid by a borrower, expressed as a percentage of the principal borrowed. Annuity due F. Perpetuity G. Future value H. Amortization schedule I. Opportunity cost of funds J. 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 an annuity due? O PMT X{1 - [1/(1 + r)"]} O PMT X ({1 - [1/(1 + r)"]}/r) x (1 + r) O PMT/ O PMT x {[(1 + r)" - 1]/r} x (1 + r)