Annuity
A series of equal payments made or received at regular time intervals
Annuity Due
A series of equal annuity payments made or received at the beginning of each period
Compound Interest Method
A method in which interest is calculated on both the original principal and on all interest accumulated since the beginning of the investment time period
Compounding
Converting a present value into its future value taking into account the time value of money. It is the opposite of discounting.
Discounting
Converting future cash flows into their present value taking into account the time value of money. It is the opposite of compounding.
Future Value
What an amount invested today (or a series of payments made over time) will be worth at a given time in the future using compound interest method, which accounts for the time value of money
Future Value Factor
The factor used to compound a present amount to its future worth. It is the reciprocal of the present value factor and is calculated using the formula (1+i)^n.
Future Value Factor of an Annuity
A factor that when multiplied by a stream of equal payments equals the future value of that stream
Future Value of an Annuity
What an equal series of payments will be worth at some future date using compound interest.
Future Value of an Annuity Table
Table of factors that shows the future value of equal flows at the end of each period, given a particular interest rate.
Future Value Table
Table of factors that shows the future value of a single investment at a given interest rate
Opportunity Cost
Proceeds lost by forgoing other opportunities
Ordinary Annuity
A series of equal annuity payments made or received at the end of each period
Perpetuity
An annuity for an infintire period of time
Present Value
The value today of a payment (or series of payments) to be received in the future, taking into account the cost of capital (sometimes called discount rate).
Present Value Factor
The factor used to discount a future amount to its current worth. It is the reciprocal of the future value factor and is calculated using the formula 1/(1+i)^n.
Present Value Factor of an Annuity
A factor that when multiplied by a stream of equal payments equals the present value of that stream
Present Value of an Annuity
What a series of equal payments in the future is worth today, taking into account the time value of money
Present Value of an Annuity Table
Table of factors that shows the worth today of equal flows at the end of each future period, given a particular interest rate
Present Value Table
Table of factors that shows what a single amount to be received in the future is worth today at a given interest rate
Simple Interest Method
A method in which interest is calculated only on the original principal. The principal is the amount invested
Time Value of Money
The concept that a dollar received today is worth more than a dollar received in the future.