| Term | Definition |
|---|
| Time Line | shows timing of cash flows |
| PV | Present Value |
| FV | Future Value |
| N | Number of periods |
| I | Interest Rate |
| Compounding | arithmetic process of determining the final value of a casho flow or series of cash flows when compount interest is applied |
| Simple Interest | Interest is not earned on interest |
| Compounding Interest | Interest is earned on prior periods interest |
| Opportunity Cost | rate of return you could earn on an alternative investment of similiar risk |
| Discounting | discounting is the reverse of compounding; |
| Consol | perpetual bond issued by the British Government to consolidate past debts; in general; any perpetual bond |
| Perpetuity | a stream of equal payments at fixed intervals expected to continue forever |
| Nominal Interest Rate | Quoted/Stated - the contracted rate |
| APR | periodic rate times the number of periods per year |
| EAR | Effective Annual rate of interest actually being earned as opposed to the quoted rate; Equivalent Annual Rate |
| Amortized Loan | A loan that is repaid in equal payments over its life. |
| Amortization Schedule | A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero. |
Combine with other sets
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