Finance 300 Final Exam Key Terms With
100% Verified Solutions
single payment or lump sum - ANSWER -A single payment or deposit made at
one time, as opposed to a number of smaller payments or deposits made in
installments.
time value of money (TMV) - ANSWER -The concept that an amount of money is
worth more today than the exact same amount of money at some point in the
future.
Treasury investments - ANSWER -Debt obligations such as T-bills (Treasury
bills), bonds, and notes issued by the US Department of the Treasury.
Underinvested - ANSWER -Describes an insufficient amount of investment or an
investment that is earning an insufficient rate of interest.
Uninvested - ANSWER -Describes cash that is being held in reserve, is not
invested in an account or financial instrument, and is not earning interest or any
return.
Annuity - ANSWER -A stream of regular, periodic payments to be received or
paid.
annuity due - ANSWER -A stream of periodic payments in which the payment or
receipt occurs at the beginning of each period.
constant perpetuity - ANSWER -A stream of periodic payments that is expected to
continue indefinitely with no change in the amount paid or received.
effective interest rate - ANSWER -The interest rate that results when
compounding occurs multiple times within a year; the true cost of borrowing.
, growing perpetuity - ANSWER -A stream of periodic payments that is expected to
continue indefinitely with growth of the amount paid or received in the future,
usually by a fixed percentage.
loan amortization - ANSWER -The scheduling of periodic repayment of a debt,
typically involving regular payments or receipts of amounts that include both
interest payment and repayment of the principal of the amount owed.
lump sum - ANSWER -A single cash payment made in lieu of a series of future
payments, such as a lottery payout or a legal settlement.
ordinary annuity - ANSWER -A stream of periodic payments in which the
payment or receipt occurs at the end of each period.
Perpetuity - ANSWER -A stream of periodic payments that is expected to
continue indefinitely.
preferred stock - ANSWER -Shares of ownership in a corporation that typically
entitle the holder to a fixed dividend per share, if declared by the corporation, with
priority over holders of that corporation's common stock.
required rate of return - ANSWER -The minimum amount of return that an
investor will accept on an investment given the level of risk involved.
retirement planning - ANSWER -The process of determining one's objectives for
retirement, including one's finances, and developing strategies and tactics to
achieve them.
structured settlements - ANSWER -Monetary legal settlements that are paid out in
installments, such as an annuity, rather than a lump sum cash amount.
Checking account - ANSWER -Incomes from wages and perhaps from
investments are deposited to this account, and expenses are paid from it.
, Direct deposit - ANSWER -For employers and government agencies, it offers a
more efficient, timely, and secure method of distributing funds.
Automatic payments - ANSWER -May be scheduled to take care of a periodic
payment (i.e., same payee, same amount) such as a mortgage or car payment.
Debit card - ANSWER -Used to directly transfer funds at the time of purchase;
money is withdrawn from your account and transferred to the payee's with one
quick swipe at checkout.
ATM (automated teller machine) card - ANSWER -Allows for convenient access
to the cash in your bank accounts through instant cash withdrawals.
Money markets - ANSWER -Used for relatively short-term, low-risk trading of
money.
Capital markets - ANSWER -Used for relatively long-term, higher-risk trading of
money.
Intermediary - ANSWER -A bank functions as an intermediary or 'middleman'
between the individual lender of money (the saver) and the individual borrower of
money.
Credit unions - ANSWER -Cooperative membership organizations, with
depositors as members.
Demand deposit - ANSWER -Typically earns no or very low interest but allows
complete liquidity on demand.
Time deposits - ANSWER -Or savings accounts, offer minimal interest or a bit
more interest with minimum deposit requirements.
Certificate of deposits (CDs) - ANSWER -If you are willing to give up more
liquidity, certificates of deposit (CDs) offer a higher price for liquidity but extract a
time commitment enforced by a penalty for early withdrawal.
100% Verified Solutions
single payment or lump sum - ANSWER -A single payment or deposit made at
one time, as opposed to a number of smaller payments or deposits made in
installments.
time value of money (TMV) - ANSWER -The concept that an amount of money is
worth more today than the exact same amount of money at some point in the
future.
Treasury investments - ANSWER -Debt obligations such as T-bills (Treasury
bills), bonds, and notes issued by the US Department of the Treasury.
Underinvested - ANSWER -Describes an insufficient amount of investment or an
investment that is earning an insufficient rate of interest.
Uninvested - ANSWER -Describes cash that is being held in reserve, is not
invested in an account or financial instrument, and is not earning interest or any
return.
Annuity - ANSWER -A stream of regular, periodic payments to be received or
paid.
annuity due - ANSWER -A stream of periodic payments in which the payment or
receipt occurs at the beginning of each period.
constant perpetuity - ANSWER -A stream of periodic payments that is expected to
continue indefinitely with no change in the amount paid or received.
effective interest rate - ANSWER -The interest rate that results when
compounding occurs multiple times within a year; the true cost of borrowing.
, growing perpetuity - ANSWER -A stream of periodic payments that is expected to
continue indefinitely with growth of the amount paid or received in the future,
usually by a fixed percentage.
loan amortization - ANSWER -The scheduling of periodic repayment of a debt,
typically involving regular payments or receipts of amounts that include both
interest payment and repayment of the principal of the amount owed.
lump sum - ANSWER -A single cash payment made in lieu of a series of future
payments, such as a lottery payout or a legal settlement.
ordinary annuity - ANSWER -A stream of periodic payments in which the
payment or receipt occurs at the end of each period.
Perpetuity - ANSWER -A stream of periodic payments that is expected to
continue indefinitely.
preferred stock - ANSWER -Shares of ownership in a corporation that typically
entitle the holder to a fixed dividend per share, if declared by the corporation, with
priority over holders of that corporation's common stock.
required rate of return - ANSWER -The minimum amount of return that an
investor will accept on an investment given the level of risk involved.
retirement planning - ANSWER -The process of determining one's objectives for
retirement, including one's finances, and developing strategies and tactics to
achieve them.
structured settlements - ANSWER -Monetary legal settlements that are paid out in
installments, such as an annuity, rather than a lump sum cash amount.
Checking account - ANSWER -Incomes from wages and perhaps from
investments are deposited to this account, and expenses are paid from it.
, Direct deposit - ANSWER -For employers and government agencies, it offers a
more efficient, timely, and secure method of distributing funds.
Automatic payments - ANSWER -May be scheduled to take care of a periodic
payment (i.e., same payee, same amount) such as a mortgage or car payment.
Debit card - ANSWER -Used to directly transfer funds at the time of purchase;
money is withdrawn from your account and transferred to the payee's with one
quick swipe at checkout.
ATM (automated teller machine) card - ANSWER -Allows for convenient access
to the cash in your bank accounts through instant cash withdrawals.
Money markets - ANSWER -Used for relatively short-term, low-risk trading of
money.
Capital markets - ANSWER -Used for relatively long-term, higher-risk trading of
money.
Intermediary - ANSWER -A bank functions as an intermediary or 'middleman'
between the individual lender of money (the saver) and the individual borrower of
money.
Credit unions - ANSWER -Cooperative membership organizations, with
depositors as members.
Demand deposit - ANSWER -Typically earns no or very low interest but allows
complete liquidity on demand.
Time deposits - ANSWER -Or savings accounts, offer minimal interest or a bit
more interest with minimum deposit requirements.
Certificate of deposits (CDs) - ANSWER -If you are willing to give up more
liquidity, certificates of deposit (CDs) offer a higher price for liquidity but extract a
time commitment enforced by a penalty for early withdrawal.
