Question

Complete the following sentences by filling in the blanks using the most appropriate terms: i. The process of finding present values if often referred to as __________________ and is the reverse of the ______________ process. ii. The equation FVn = PV (1+i)n determines the future value of a sum at the end of n periods. The factor (1+i)n is known as the __________ __________ _______________ ____________. iii. A series of payments of a constant amount for a specified number of periods is a(n) ______________________.

Answer 1

i. DISCOUNTING, COMPUNDING

Discounting is determining the PV of a payment or a stream of payments that is to be received in the future. It is opposite in meaning to 'Compunding', which is used to the FV of a payment or a stream of payments that is to be received in a period

ii. FUTURE VALUE INTEREST FACTOR

Future value interest factor (FVIF) is a factor that is utilized to provide a simple calculation for determining the future value dollar amount of a sum of money to be received at some point in time.

iii. ANNUITY

Annuity is a stream of equal periodic payments that happen for a defined number of periods.