Time Value of Money Concepts

These flashcards cover key vocabulary terms and definitions related to the Time Value of Money and financial calculations.

Time Value of Money (TVM)

The concept that money available today is worth more than the same amount in the future due to its potential earning capacity.

Future Value (FV)

The value of a current asset at a specified date in the future based on an assumed rate of growth over time.

Present Value (PV)

The current worth of a future sum of money or stream of cash flows given a specified rate of return.

Annuity

A series of equal payments made at regular intervals over a specified period.

Ordinary Annuity

An annuity where payments are made at the end of each period.

Annuity Due

An annuity where payments are made at the beginning of each period.

Interest Rate

The proportion of a loan or deposit that is charged as interest to the borrower, typically expressed as an annual percentage of the loan.

Compounding Periods

The intervals at which interest is calculated and added to the principal balance of an investment or loan.

Rate of Return (I/YR)

The gain or loss made on an investment relative to the amount of money invested, expressed as a percentage.

Payment Calculation (PMT)

The process of determining the amount to be paid on a loan or investment during each period.