Term
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Definition
| An important tool used in time value analysis; it is a graphical representation used to show the timing of cash flows. |
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Term
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Definition
| The amount to which a cash flow or series of cash flows will grow over a period of time when compounded at a given interest rate. |
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Term
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Definition
| The value today of a future cash flow or series of cash flows. |
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Term
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Definition
| The arithmetic process of determining the final value of a cash flow or series of cash flows when compound interest is applied. |
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Term
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Definition
| Occurs when interest is earned on prior periods' interest. |
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Term
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Definition
| Occurs when interest is not earned on interest. |
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Term
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Definition
| The rate of return you could earn on an alternative investment of similar risk. |
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Term
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Definition
| The process of finding the present value of a cash flow or a series of cash flows; discounting is the reverse of compounding. |
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Term
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Definition
| A series of equal payments at fixed intervals for a specified number of periods. |
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Term
| Ordinary (Deferred) Annuity |
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Definition
| An annuity whose payments occur at the end of each period. |
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Term
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Definition
| An annuity whose payments occur at the beginning of each period. |
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Term
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Definition
| The future value of an annuity over N periods. |
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Term
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Definition
| The present value of an annuity of N periods. |
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Term
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Definition
| A perpetual bond issued by the British government to consolidate past debts; in general, any perpetual bond. |
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Term
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Definition
| A stream of equal payments at fixed intervals expected to continue forever. |
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Term
| Uneven (Nonconstant) Cash Flows |
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Definition
| A series of cash flows where the amount varies from one period to the next. |
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Term
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Definition
| The term designates equal cash flows coming at regular intervals. |
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Term
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Definition
| The term designates a cash flow that's not part of an annuity. |
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Term
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Definition
| The arithmetic process of determining the final value of a cash flow or series of cash flows when interest is added once a year. |
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Term
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Definition
| The arithmetic process of determining the final value of a cash flow or series of cash flows when interest is added twice a year. |
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Term
| Nominal (Quoted, or Stated) Interest Rate, Inom |
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Definition
| The contracted (or quoted or stated) interest rate. |
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Term
| Annual Percentage Rate (APR) |
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Definition
| The periodic rate times the number of periods per year. |
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Term
| Effective (Equivalent) Annual Rate (EFF% or EAR) |
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Definition
| The annual rate of interest actually being earned, as opposed to the quoted rate. Also called the "equivalent annual rate." |
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Term
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Definition
| A loan that is repaid in equal payments over its life. |
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Term
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Definition
| A table showing precisely how a loan will be repaid. It gives the required payment date and a breakdown of the payment, showing how much interest and how much is repayment of principal. |
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