Match the terms relating to the basic terminology and concepts of the time value of money on the left with the descriptions of the terms on the right. 1. Discounting
2. Time value of money
3. Amortized loan
4. Ordinary annuity
5. Annual percentage rate
6. Amortization schedule
7. Opportunity cost of funds
A. The concept that states that the timing of the receipt or payment of a cash flow will affect its value to the holder of the cash flow.
B. The name given to the amount to which a cash flow, or a series of cash flows, will grow over a given period of time when compounded at a given rate of interest.
C. A loan in which the payments include interest as well as loan principal.
D. A value that represents the interest paid by borrowers or earned by lenders, expressed as a percentage of the amount borrowed or invested over a 12-month period.
E. A cash flow stream that is created by an investment or loan that requires its cash flows to take place on the last day of each quarter and requires that it last for 10 years.
F. A schedule or table that reports the amount of principal and the amount of interest that make up each payment made to repay a loan by the end of its regular term.
G. A process that involves calculating the current value of a future cash flow or series of cash nows based on a certain interest rate.
H. A 6% return that you could have earned if you had made a particular investment.
I. A series of equal (constant) cash flows (receipts or payments) that are expected to continue forever.
J. A cash now stream that is created by a lease that requires the payment to be paid on the first of each month and a lease period of three years. Annuity due F. Perpetuity G. H Future value 1. 3. Time value of money calculations can be solved using a mathematical equation, a financial calculator, or a spreadsheet. Which of the following equations can be used to solve for the present value of an annuity?
A. PMT * ((1 + r)n - 1)/r).
B. FV/(1 + r)n.
C. PMT * ((1 + r)n - 1)/r) *(1 + r).
D. PMT *(1 -(1/(1 + r)n))/r.