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 a lease that requires the payment to be paid on the first of each month and a lease period of three years. Time value of money B. 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. Amortized loan C. 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. Ordinary annuity D. A series of equal (constant) cash flows (receipts or payments) that are expected to continue forever. Annual percentage rate E. A loan in which the payments include interest as well as loan principal. Annuity due F. The process of determining the present value of a cash flow or series of cash flows to be received or paid in the future. 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. An interest rate that reflects the return required by a lender and paid by a borrower, expressed as a percentage of the principal borrowed. Amortization schedule I. A rate that represents the return on an investor’s best available alternative investment of equal risk. 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.
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 a lease that requires the payment to be paid on the first of each month and a lease period of three years. Time value of money B. 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. Amortized loan C. 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. Ordinary annuity D. A series of equal (constant) cash flows (receipts or payments) that are expected to continue forever. Annual percentage rate E. A loan in which the payments include interest as well as loan principal. Annuity due F. The process of determining the present value of a cash flow or series of cash flows to be received or paid in the future. 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. An interest rate that reflects the return required by a lender and paid by a borrower, expressed as a percentage of the principal borrowed. Amortization schedule I. A rate that represents the return on an investor’s best available alternative investment of equal risk. 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.
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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Question
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 a lease that requires the payment to be paid on the first of each month and a lease period of three years. | |
| Time value of money | B. | 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. | |
| Amortized loan | C. | 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. | |
| Ordinary |
D. | A series of equal (constant) cash flows (receipts or payments) that are expected to continue forever. | |
| Annual percentage rate | E. | A loan in which the payments include interest as well as loan principal. | |
| Annuity due | F. | The process of determining the present value of a cash flow or series of cash flows to be received or paid in the future. | |
| 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. | An interest rate that reflects the return required by a lender and paid by a borrower, expressed as a percentage of the principal borrowed. | |
| Amortization schedule | I. | A rate that represents the return on an investor’s best available alternative investment of equal risk. | |
| 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. |
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