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11 Cards in this Set
- Front
- Back
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stream of cash flows
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a series of cash flows lasting several periods
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timeline
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a linear representation of the timing of (potential) cashflows
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future value
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the value of a cash flow that is moved forward in time
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Compounding
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Computing the return on an investment over a long horizon by multiplying the return factors associated with each intervening period
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compounding interest
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the effect of earning "interest on interest"
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discounting
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finding the equivalent value today of a future cash flow by multiplying by a discount factor, or equivalently, dividing by 1 plus the discount rate
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perpetuity
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a stream of equal cash flows that occurs at regular intervals and lasts forever
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consol
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a bond that promises its owner a fixed cash flow every year, forever
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annuity
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A stream of equal cash flows arriving at a regular interval over a specified time period
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growing perpetuity
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a stream of cash flows that occurs at regular intervals and grows at a constant rate forever
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IRR
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internal rate of return; the interest rate that sets the net present value of the cash flows equal to zero
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