HS 300 Flashcards – Module 6

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[h] HS300 – Module 6

[q] Time value of money concept

[a] Indicates the value of an amount received today is greater than the value of receiving that same amount in the future.

[q] Opportunity Cost

[a] The value of something that must be given up to acquire or achieve something else.

[q] Discounting

[a] The process of reducing a future value amount to a smaller present value.

[q] Compounding

[a] The process of increasing a present value into a larger future value.

[q] Future value

[a] The value of a current asset at a future date based on an assumed rate of growth.

[q] Compound interest

[a] The interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

[q] Future value

[a] The value of a current asset at a future date based on an assumed rate of growth.

[q] Present value

[a] The current value of a future sum of money or stream of cash flows given a specified rate of return.

[q] Annuity

[a] A constant cash flow amount saved or received.

[q] Ordinary Annuity

[a] An annuity in which payments are received at the end of each period.

[q] Annuity Due

[a] An annuity in which payments are received at the beginning of each period.

[q] Discount rate

[a] The rate of return used in present value calculations.

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