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 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 type of security that is frequently used in mortgages and requires that the loan payment contain both interest and loan principal. Time value of money B. Amortized loan C. 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. The process of determining the present value of a cash flow or series of cash flows to be received or paid in the future. Ordinary annuity D. Annual percentage rate E. The name given to the amount to which a cash flow, or a series of cash flows, will grow over a given period of time when compounded at a given rate of interest. A rate that represents the return on an investor's best available alternative investment of equal risk. Annuity due F. Perpetuity G 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. Future value H. Amortization schedule I. A series of equal cash flows that occur at the beginning of each of the equally spaced intervals (such as daily, monthly, quarterly, and so on). A cash flow stream that is generated by a share of preferred stock that is expected to pay dividends every quarter indefinitely. A series of equal cash flows that occur at the end of each of the equally spaced intervals (such as daily, monthly, quarterly, and so on). Opportunity cost of funds J. 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 future value of an ordinary annuity? O PMT x {1 - [1/(1 + r)"]}/ PMT x {[(1 + r)" - 1]/r} x (1 + r) OFV/(1 + r)" O PMT x {[(1 + r)" - 1]/r}