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Finace Chapter 5

  1. Future Value (FV)
    the amount an investment is worth after one or more periods
  2. compounding
    the process of accumulating interst on an investment over time toe arn more interest
  3. interest on interest
    interest earned on the reinvestment of previous interest payments
  4. compound interest
    interest earned on both the initial principal and the interst reinvested from prior periods
  5. simple interest
    interst earned only on the orginal principal amount invested
  6. present value (PV)
    the current value of future cash flows discounted at the appropriate discount rate
  7. discount
    calculate the present value of some future amount
  8. discount rate
    the rate used to calculate the present value of future cash flows
  9. discounted cash flow (DCF) valuation
    calculating the present value of a future cash flow to determine its value today
  10. Figure out what we should be solving for and state the calculator key
    you've been saving up to buy the godot comany. the total cost will be 10 million. you currently have about 2.3 million. if you earn 5 percent on your money how long will you have to wait? at 16 percent how long must you wait?
    were solving for the number of periods, N
  11. Figure out what we should be solving for and state the calculator key
    you estimate that you will need about 80,000 to send your child to college in eight years. you have about 35000 now. if you can earn 20 percent per year will you make it? and at what rate will you reach your goal?
    solving for future value and I/Y
  12. Figure out what we should be solving for and state the calculator key
    you are considering a one year investment. if you put up 1250 you will get back 1350 what rate is this investment paying?
    solving for rate
Author
ndumas2
ID
100441
Card Set
Finace Chapter 5
Description
Terms and Hints for Exam 1
Updated

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