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
Related questions
Question
|
Term
|
Answer
|
|
Description
|
|---|---|---|---|
| Discounting | H | A. | A series of equal (constant) cash flows (receipts or payments) that are expected to continue forever. |
| 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 series of equal cash flows that occur at the beginning of each of the equally spaced intervals (such as daily, monthly, quarterly, and so on). | |
| Ordinary |
D. | A 6% return that you could have earned if you had made a particular investment. | |
| Annual percentage rate | E. | 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. | |
| Annuity due | F. | A type of security that is frequently used in mortgages and requires that the loan payment contain both interest and loan principal. | |
| Perpetuity | G. | An interest rate that reflects the return required by a lender and paid by a borrower, expressed as a percentage of the principal borrowed. | |
| Future value | H. | A concept that maintains that the owner of a cash flow will value it differently, depending on when it occurs. | |
| Amortization schedule | I. | 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. | |
| J. | The process of determining the |
Time value of money calculations can be solved using a mathematical equation, a financial calculator, or a spreadsheet. Which of the following equations can be used to solve for the present value of an ordinary annuity?
PMT x {1 – [1/(1 + r)nn]}/r
PMT x {[(1 + r)nn – 1]/r}
PMT/r
PMT x {[(1 + r)nn – 1]/r} x (1 + r)
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