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week 2
compound annual growth rate (CAGR)
The average annual growth rate over a specified period of time.
compound interest
Interest earned both on the original principal amount and on interest previously earned.
compounding
The process by which interest earned on an investment is reinvested, so in future periods interest is earned on the interest as well as the principal.
discount rate
The interest rate used in the discounting process to find the present value of future cash flows.
discounting
The process by which the present value of future cash flows is obtained.
future value (FV)
The value of an investment after it earns interest for one or more periods.
interest on interest
Interest earned on interest that is earned in previous periods.
present value (PV)
The current value of future cash flows discounted at the appropriate discount rate.
principal
The amount of money on which interest is paid.
simple interest
Interest earned on the original principal amount only.
time value of money
The difference in value between a dollar in hand today and a dollar promised in the future; a dollar today is worth more than a dollar in the future.
time zero
The beginning of a transaction; often the current point in time.
Note 
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