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8 Cards in this Set
- Front
- Back
Interest earned on both the initial principal and the interest reinvested from prior periods.
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Compound Interest
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Interest earned only on the original principal amount invested.
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Simple interest
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The current value of future cash flows discounted at the appropriate discount rate.
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Present value (PV)
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The rate used to calculate the present value of future cash flows.
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Discount rate
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The amount an investment is worth after one or more periods. Also compound value.
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Future value (FV)
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Future Value =
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PV × (1 + r)^t
(where: r = Interest rate; t = Number of periods) |
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Interest rate =
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([FV] ÷ [PV])^(1/t) - 1
(where: t = Number of periods) |
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Present value =
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FV / (1 + discount rate)^t
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