1. Basic concepts Finance, or financial management, requires the knowledge and precise use of the language of the field. Match the terms relating to the basic terminology and concepts of the time value of money on the left with the descriptions of the terms on the right Read each description carefully and type the letter of the description in the Answer column next to the correct term. These are not necessarily complete definitions, but there is only one possible answer for each term. Term Answer Discounting A. Description A cash flow stream that is created by a lease that requires the payment to be paid on the first of each month and a lease period of three years. Time value of money B. Amortized loan C. A cash flow stream that is created by an investment or loan that requires its cash flows to take place on the last day of each quarter and requires that it last for 10 years. A schedule or table that reports the amount of principal and the amount of interest that make up each payment made to repay a loan by the end of its regular term. A series of equal (constant) cash flows (receipts or payments) that are expected to continue forever. Ordinary annuity D. Annual percentage rate E. Annuity due F. Perpetuity G. A type of security that is frequently used in mortgages and requires that the loan payment contain both interest and loan principal. A process that involves calculating the current value of a future cash flow or series of cash flows based on a certain interest rate. The concept that states that the timing of the receipt or payment of a cash flow will affect its value to the holder of the cash flow. A value that represents the interest paid by borrowers or earned by lenders, expressed as a percentage of the amount borrowed or invested over a 12-month period. A rate that represents the return on an investor's best available alternative investment of Future value H. Amortization schedule I. equal risk. Opportunity cost of funds J. One of the four major time value of money terms; the amount to which an individual cash flow or series of cash payments or receipts will grow over a period of time when earning interest at a given rate of interest. Time value of money calculations can be solved using a mathematical equation, a financial calculator, or a spreadsheet. Which of the following equations can be used to solve for the present value of a perpetuity? OFV/(1 + r)" O PV x (1 + r)" O PMT/T O PMT x({1 - [1/(1 + r)"]}/r)