Corporate Finance - Ross, Westerfield KEY Questions and CORRECT Answers

annuity due - An annuity for which cash flows occur at the beginning of the period. perpetuity - An annuity in which the cash flows continue forever. consol - A type of perpetuity. stated interest rate - The interest rate expressed in terms of the interest payment made each period. Also known as the 'quoted interest rate'. effective annual rate (EAR) - The interest rate expressed as if it were compounded once per year. annual percentage rate (APR) - The interest rate charged per period multiplied by the number of periods per year. Time value of money - the principle that a dollar received today is worth more than a dollar received in the future time zero - The beginning of a transaction; often the current point in time Future Value (FV) - the value of an investment after it earns interest for one or more periods Simple interest - interest earned only on the original principal amount invested future value (FV) - the amount an investment is worth after one or more periods compounding - the process of accumulating interest on an investment over time to earn more interest interest on interest - interest earned on the reinvestment of previous interest payments