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a. PV- Present Value, the beginning amount.

Int- Interest per year

FV- Future Value or ending amount in an account where N is the number of periods the money is left in the account.

PVA- Present value annuity

FVA- Future value annuity and the ending value of a stream of equal payments.

PMT- Payment

M- Number of compounding period per year

I nom- The nominal , or quoted, interest rat

b. Opportunity cost rate- is the rate of return you can earn on an alternative investment of a similar risk.

c. Annuity- a series of equal periodic payments for a specific number of periods.

Lump sum payment- When you pay a large amount of amount due.

Cash flow- annuities with their equal payments in each period

Uneven cash flow stream- happens when a series of payments of annuity payments plus final lump sum.

d. Ordinary annuity- an annuity whose payments occur at the end of each period.

Annuity due- If payments are paid in the beginning of each period, then we have an annuity due.

e. Perpetuity- is an annuity with an infinite number of payments.

Consul- it promises to pay interest perpetually, they are called perpetuities. Perpetuity is a simply an annuity with an extended life.

f. Outflow- the outflow of the payment when completed.

Inflow- the inflow of the present value

Time line- helps visualize what’s happening in a particular problem.

Terminal value- is a horizon value of a security is the present value at the future point in time of all future cash flows when expect stable growth rate forever.

g. Compounding - is the process of determining the future value of cash flow or a series of cash flow. It’s the beginning amount plus interest earned.

Discounting- is the process of determining the