Question

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. Read each description carefully and type the letter of the description in the Answer column next to the correct term. These are not necessarily complete definitions, but there is only one possible answer for each term.

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 flows 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 flow 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.

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 due?

Answer 1

Answer:

Discounting - G. A process that involves calculating the current value of a future cash flow or series of cash flows based on certain interest rate. Time Value of Money - A. A concept that maintains that the owner of a cash flow will value it differently, depending on when it occurs. Amortized loan - C. A type of security that is frequently used in mortgages and requires that the loan payment contain both interest and loan principal. Ordinary Annuity - 1. 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 is last for 10 years. Annual percentage rate - D. An interest rate that reflects the return required by a lender and paid by a borrower, expressed as a percentage of the principal borrowed. Annuity due - E. A cash flow 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. Perpetuity - J. A cash flow stream that is generated by a share of preferred stock that is expected to pay dividends every quarter indefinitely Future Value - B. The name given to the amount to which a cash flow, or a series of cash flow that will grow over a given period of time when compounded at a given rate of interest. Amortization Schedule - F. A table that reports the results of the disaggregation of each payment on an amortized loan, such as a mortgage, into its interest and loan repayment components. Opportunity cost of funds - H.A 6% return that you could have earned if you made a particular investment

Answer 2

Answer-

Kindly find below the correct description for each term-

Term	Description
Discounting	J . The process of determining ---- paid in the future
Time value of money	H. A concept that maintains------ on when it occurs.
Amortized loan	F. A loan in which ----------- as loan principal.
Ordinary annuity	B. A cash flow ---------------- for 10 years.
Annual percentage rate	G. An interest rate that ---------- principal borrowed.
Annuity due	C. A series of equal cash flows ---- spaced intervals. (such as daily--- andso on.)
Perpetuity	A. A series of equal ----- to continue forever.
Future value	I . The name given to ------ given rate of interest.
Amortization schedule	E. A schedule or table ---- end of its regular term.
Oppotunity cost of funds	D. A 6 % return that ---------- a particular investment.