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		Description
Discounting		A.	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.
Time value of money		B.	A rate that represents the return on an investors best available alternative investment of equal risk.
Amortized loan		C.	A table that reports the results of the disaggregation of each payment on an amortized loan, such as a mortgage, into its interest and loan repayment components.
Ordinary annuity		D.	A loan in which the payments include interest as well as loan principal.
Annual percentage rate		E.	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.
Annuity due		F.	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.
Perpetuity		G.	A concept that maintains that the owner of a cash flow will value it differently, depending on when it occurs.
Future value		H.	A cash flow stream that is generated by a share of preferred stock that is expected to pay dividends every quarter indefinitely.
Amortization schedule		I.	The process of determining the present value of a cash flow or series of cash flows to be received or paid in the future.
Opportunity cost of funds		J.	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.

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?

PMT x ({1 [1/(1 + r)nn]}/r) x (1 + r)

PMT x {[(1 + r)nn 1]/r} x (1 + r)

PMT/r

PMT x ({1 [1/(1 + r)nn]}/r)