Time Value of Money - money can be invested today to earn interest and grow to a larger dollar amount
in the future
Interest - the amount of money paid or received in excess of the amount borrowed or lent
Simple Interest - computed by multiplying an initial investment times both the applicable interest rate
and the period of time for which the money is used
Compound Interest - includes interest not only the initial investment but also on the accumulated
interest in previous periods
Effective Rate - the rate at which money actually will grow during a full year
Future Value of a Single Amount - the amount of money that a dollar will grow to at some point in the
future
Present Value of a Single Amount - today's equivalent to a particular amount in the future
Monetary Assets - include money and claims to receive money, the amount of which is fixed or
determinable
Monetary Liabilities - obligations to pay amounts of cash, the amount of which is fixed or determinable
SFAC No. 7 - provides a framework for using future cash flows in accounting measurements
Annuity - cash flows received or paid in the same amount each period
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