Present Value
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7 Terms
1
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What is the definition of present value?
The amount which, if invested today at a given rate, would growth to a specified future amount by a specified future date.
2
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What does discounting refer to?
Calculating the present value
3
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What must you do to n and i if compounding happens more than annually?
n = years x compounding periods, i = interest rate/compounding periods
4
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Does more frequent compounding increase or decrease PV?
The PV decreases.
5
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Does less frequent compounding increase or decrease PV?
The PV increases.
6
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What is the relationship between PV and i?
The present value $ and discount rate (i) are inversely related.
7
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What does i refer to in present value?
The discount rate
Note 
Flashcards (23)