 |  Fundamentals of Corporate Finance, 4/e Stephen A. Ross,
Massachusetts Institute of Technology
Randolph W. Westerfield,
University of Southern California
Bradford D. Jordan,
University of Kentucky
Gordon S. Roberts,
York University
Introduction to Valuation: The Time Value of Money
Key TermsBelow are the key terms featured in this chapter. Clicking on a term will reveal its definition. The textbook's full glossary is also available for online searching.
| Compounding | The process of accumulating interest in an investment over time to earn more interest.
(See Refer to page 132)
| | | | | Compound Interest | Interest earned on both the initial principal and the interest reinvested from prior periods.
(See Refer to page 132)
| | | | | Discount | Calculate the present value of some future amount.
(See Refer to page 137)
| | | | | Discount Rate | The rate used to calculate the present value of future cash flows.
(See Refer to page 138)
| | | | | Future Value (FV) | The amount an investment is worth after one or more periods. Also compound value.
(See Refer to page 131)
| | | | | Interest on Interest | Interest earned on the reinvestment of previous interest payments.
(See Refer to page 132)
| | | | | Present Value (PV) | The current value of future cash flows discounted at the appropriate discount rate.
(See Refer to page 137)
| | | | | Simple Interest | Interest earned only on the original principal amount invested.
(See Refer to page 132)
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2002 McGraw-Hill Higher Education