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1. Basic concepts 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 Discounting Time value of money Amortized loan Ordinary annuity Annual percentage rate Annuity due Perpetuity Future value Amortization schedule Opportunity cost of funds Answer Description A. A series of equal (constant) cash flows (receipts or payments) that are expected to continue forever. B. 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. C. An interest rate that reflects the return required by a lender and paid by a borrower, expressed as a percentage of the principal borrowed. D. 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). E. 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. F. A rate that represents the return on an investor's best available alternative investment of equal risk. G. A type of security that is frequently used in mortgages and requires that the loan payment contain both interest and loan principal. H. The process of determining the present value of a cash flow or series of cash flows to be received or paid in the future. I. 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. J. 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

1. Basic concepts 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 Discounting Time value of money Amortized loan Ordinary annuity Annual percentage rate Annuity due Perpetuity Future value Amortization schedule Opportunity cost of funds Answer Description A. A series of equal (constant) cash flows (receipts or payments) that are expected to continue forever. B. 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. C. An interest rate that reflects the return required by a lender and paid by a borrower, expressed as a percentage of the principal borrowed. D. 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). E. 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. F. A rate that represents the return on an investor's best available alternative investment of equal risk. G. A type of security that is frequently used in mortgages and requires that the loan payment contain both interest and loan principal. H. The process of determining the present value of a cash flow or series of cash flows to be received or paid in the future. I. 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. J. 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

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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1. Basic concepts 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 Discounting Time value of money Amortized loan Ordinary annuity Annual percentage rate Annuity due Perpetuity Future value Amortization schedule Opportunity cost of funds Answer — Description A. A series of equal (constant) cash flows (receipts or payments) that are expected to continue forever. 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. An interest rate that reflects the return required by a lender and paid by a borrower, expressed as a percentage of the principal borrowed. D. 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). B. C. E. 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. F. G. A type of security that is frequently used in mortgages and requires that the loan payment contain both interest and loan principal. The process of determining the present value of a cash flow or series of cash flows to be received or paid in the future. H. I. A rate that represents the return on an investor's best available alternative investment of equal risk. J. 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.
Transcribed Image Text:1. Basic concepts 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 Discounting Time value of money Amortized loan Ordinary annuity Annual percentage rate Annuity due Perpetuity Future value Amortization schedule Opportunity cost of funds Answer — Description A. A series of equal (constant) cash flows (receipts or payments) that are expected to continue forever. 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. An interest rate that reflects the return required by a lender and paid by a borrower, expressed as a percentage of the principal borrowed. D. 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). B. C. E. 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. F. G. A type of security that is frequently used in mortgages and requires that the loan payment contain both interest and loan principal. The process of determining the present value of a cash flow or series of cash flows to be received or paid in the future. H. I. A rate that represents the return on an investor's best available alternative investment of equal risk. J. 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.
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 perpetuity? O FV/(1 + r)¹¹ O PMT/r O PV x (1 + r)" O PMT x ({1 - [1/(1 + r)"]}/r)
Transcribed Image Text: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 perpetuity? O FV/(1 + r)¹¹ O PMT/r O PV x (1 + r)" O PMT x ({1 - [1/(1 + r)"]}/r)
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