8.8: Key Terms
- Page ID
- 94646
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- annuity
- a stream of regular, periodic payments to be received or paid
- annuity due
- a stream of periodic payments in which the payment or receipt occurs at the beginning of each period
- constant perpetuity
- a stream of periodic payments that is expected to continue indefinitely with no change in the amount paid or received
- discount rate
- an interest rate used in time value of money calculations to determine present value; may derive from several sources, such as stated contract rates, costs to borrow, or expected rates of return on investments
- effective interest rate
- the interest rate that results when compounding occurs multiple times within a year; the true cost of borrowing
- growing perpetuity
- 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
- 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
- a single cash payment made in lieu of a series of future payments, such as a lottery payout or a legal settlement
- ordinary annuity
- a stream of periodic payments in which the payment or receipt occurs at the end of each period
- perpetuity
- a stream of periodic payments that is expected to continue indefinitely
- preferred stock
- 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
- the minimum amount of return that an investor will accept on an investment given the level of risk involved
- retirement planning
- the process of determining one’s objectives for retirement, including one’s finances, and developing strategies and tactics to achieve them
- structured settlements
- monetary legal settlements that are paid out in installments, such as an annuity, rather than a lump sum cash amount