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Perpetuities
A perpetuity is an annuity that has no end, or a stream of cash payments that continues forever. There are few actual perpetuities in existence. For example, the United Kingdom (UK) government issued them in the past; these were known as consols and were all finally redeemed in 2015. Real estate and preferred stock are among some types of investments that affect the results of a perpetuity, and prices can be established using techniques for valuing a perpetuity. Perpetuities are but one of the time value of money methods for valuing financial assets. Perpetuities are a form of ordinary annuities. The concept is closely linked to terminal value and terminal growth rate in valuation. Detailed description A perpetuity is an annuity in which the periodic payments begin on a fixed date and continue indefinitely. It is sometimes referred to as a perpetual annuity. Fixed coupon payments on permanently invested (irredeemable) sums of money are prime examples of perpetuities. Scholar ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Time Value Of Money
The time value of money is the widely accepted conjecture that there is greater benefit to receiving a sum of money now rather than an identical sum later. It may be seen as an implication of the later-developed concept of time preference. The time value of money is among the factors considered when weighing the opportunity costs of spending rather than saving or investing money. As such, it is among the reasons why interest is paid or earned: interest, whether it is on a bank deposit or debt, compensates the depositor or lender for the loss of their use of their money. Investors are willing to forgo spending their money now only if they expect a favorable net return on their investment in the future, such that the increased value to be available later is sufficiently high to offset both the preference to spending money now and inflation (if present); see required rate of return. History The Talmud (~500 CE) recognizes the time value of money. In Tractate Makkos page 3a the ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Present Value
In economics and finance, present value (PV), also known as present discounted value, is the value of an expected income stream determined as of the date of valuation. The present value is usually less than the future value because money has interest-earning potential, a characteristic referred to as the time value of money, except during times of zero- or negative interest rates, when the present value will be equal or more than the future value. Time value can be described with the simplified phrase, "A dollar today is worth more than a dollar tomorrow". Here, 'worth more' means that its value is greater than tomorrow. A dollar today is worth more than a dollar tomorrow because the dollar can be invested and earn a day's worth of interest, making the total accumulate to a value more than a dollar by tomorrow. Interest can be compared to rent. Just as rent is paid to a landlord by a tenant without the ownership of the asset being transferred, interest is paid to a lender by a borr ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Annuity (finance Theory)
In investment, an annuity is a series of payments made at equal intervals.Kellison, Stephen G. (1970). ''The Theory of Interest''. Homewood, Illinois: Richard D. Irwin, Inc. p. 45 Examples of annuities are regular deposits to a savings account, monthly home mortgage payments, monthly insurance payments and pension payments. Annuities can be classified by the frequency of payment dates. The payments (deposits) may be made weekly, monthly, quarterly, yearly, or at any other regular interval of time. Annuities may be calculated by mathematical functions known as "annuity functions". An annuity which provides for payments for the remainder of a person's lifetime is a life annuity. Types Annuities may be classified in several ways. Timing of payments Payments of an ''annuity-immediate'' are made at the end of payment periods, so that interest accrues between the issue of the annuity and the first payment. Payments of an ''annuity-due'' are made at the beginning of payment period ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Capitalization Rate
Capitalization rate (or "cap rate") is a real estate valuation measure used to compare different real estate investments. Although there are many variations, the cap rate is generally calculated as the ratio between the annual rental income produced by a real estate asset to its current market value. Most variations depend on the definition of the annual rental income and whether it is gross or net of annual costs, and whether the annual rental income is the actual amount received (initial yields), or the potential rental income that could be received if the asset was optimally rented (ERV yield). Basic formula The rate is calculated in a simple fashion as follows: Some investors may calculate the cap rate differently. In instances where the purchase or market value is unknown, investors can determine the capitalization rate using a different equation based upon historical risk premiums, as follows: Explanatory examples For example, if a building is purchased for sale pric ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Jacob Lund Fisker
Jacob Lund Fisker (born 1975) is a Danish astrophysicist and writer. He is known as the author of a philosophy of extreme early retirement that has inspired a lifestyle movement. Fisker's book ''Early Retirement Extreme'' discusses how to become financially independent with a median income. Life Fisker holds a cand.scient. degree in physics and mathematics from Aarhus University, in addition to a PhD in theoretical physics from the University of Basel in Switzerland. While at Aarhus, he received Statens Uddannelsesstøtte, a state education grant that provides Danish university students with a stipend to cover living expenses while enrolled. Even after completing his degrees, Fisker continued to live on a budget corresponding to the SU stipend he received as an undergraduate although his income increased over time. As a postdoc he saved 80% of his income and became financially independent in less than five years. He considered himself retired when he left his astrophysics ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Perpetual Bond
A perpetual bond, also known colloquially as a perpetual or perp, is a bond with no maturity date, therefore allowing it to be treated as equity, not as debt. Issuers pay coupons on perpetual bonds forever, and they do not have to redeem the principal. Perpetual bond cash flows are, therefore, those of a perpetuity. Perpetual bonds vs. equity * Although similar to equity, perpetual bonds do not have attached votes and, therefore, provide no means of control over the issuer. * Perpetual bonds are still fixed-income securities; therefore, paying coupons is mandatory whereas paying dividends on equity is discretionary. Examples * Consols that were issued by the United States and the UK governments. * The oldest examples of a perpetual bond was issued on 15 May 1624 by the Dutch water board of Lekdijk Bovendams. It is currently in the possession of Yale University and interest was most recently paid by the eventual successor of Lekdijk Bovendams ( Hoogheemraadschap De Stichtse R ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Geometric Progression
In mathematics, a geometric progression, also known as a geometric sequence, is a sequence of non-zero numbers where each term after the first is found by multiplying the previous one by a fixed, non-zero number called the ''common ratio''. For example, the sequence 2, 6, 18, 54, ... is a geometric progression with common ratio 3. Similarly 10, 5, 2.5, 1.25, ... is a geometric sequence with common ratio 1/2. Examples of a geometric sequence are powers ''r''''k'' of a fixed non-zero number ''r'', such as 2''k'' and 3''k''. The general form of a geometric sequence is :a,\ ar,\ ar^2,\ ar^3,\ ar^4,\ \ldots where ''r'' ≠ 0 is the common ratio and ''a'' ≠ 0 is a scale factor, equal to the sequence's start value. The sum of a geometric progression terms is called a '' geometric series''. Elementary properties The ''n''-th term of a geometric sequence with initial value ''a'' = ''a''1 and common ratio ''r'' is given by :a_n = a\,r^, and in general :a_n = a_m\,r^. Such a geometri ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Systematic Risk
In finance and economics, systematic risk (in economics often called aggregate risk or undiversifiable risk) is vulnerability to events which affect aggregate outcomes such as broad market returns, total economy-wide resource holdings, or aggregate income. In many contexts, events like earthquakes, epidemics and major weather catastrophes pose aggregate risks that affect not only the distribution but also the total amount of resources. That is why it is also known as contingent risk, unplanned risk or risk events. If every possible outcome of a stochastic economic process is characterized by the same aggregate result (but potentially different distributional outcomes), the process then has no aggregate risk. Properties Systematic or aggregate risk arises from market structure or dynamics which produce shocks or uncertainty faced by all agents in the market; such shocks could arise from government policy, international economic forces, or acts of nature. In contrast, specific ri ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Dividend Discount Model
In finance and investing, the dividend discount model (DDM) is a method of valuing the price of a company's stock based on the fact that its stock is worth the sum of all of its future dividend payments, discounted back to their present value. In other words, DDM is used to value stocks based on the net present value of the future dividends. The constant-growth form of the DDM is sometimes referred to as the Gordon growth model (GGM), after Myron J. Gordon of the Massachusetts Institute of Technology, the University of Rochester, and the University of Toronto, who published it along with Eli Shapiro in 1956 and made reference to it in 1959. Their work borrowed heavily from the theoretical and mathematical ideas found in John Burr Williams 1938 book "The Theory of Investment Value," which put forth the dividend discount model 18 years before Gordon and Shapiro. When dividends are assumed to grow at a constant rate, the variables are: P is the current stock price. g is the constant gr ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
War Bonds
War bonds (sometimes referred to as Victory bonds, particularly in propaganda) are debt securities issued by a government to finance military operations and other expenditure in times of war without raising taxes to an unpopular level. They are also a means to control inflation by removing money from circulation in a stimulated wartime economy. War bonds are either retail bonds marketed directly to the public or wholesale bonds traded on a stock market. Exhortations to buy war bonds have often been accompanied by appeals to patriotism and conscience. Retail war bonds, like other retail bonds, tend to have a yield which is below that offered by the market and are often made available in a wide range of denominations to make them affordable for all citizens. Before World War I Governments throughout history have needed to borrow money to fight wars. Traditionally they dealt with a small group of rich financiers such as Jakob Fugger and Nathan Rothschild, but no particular distinc ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Inflation
In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money. The opposite of inflation is deflation, a sustained decrease in the general price level of goods and services. The common measure of inflation is the inflation rate, the annualized percentage change in a general price index. As prices do not all increase at the same rate, the consumer price index (CPI) is often used for this purpose. The employment cost index is also used for wages in the United States. Most economists agree that high levels of inflation as well as hyperinflation—which have severely disruptive effects on the real economy—are caused by persistent excessive growth in the money supply. Views on low to moderate rates of inflation are more varied. Low or moderate inflation may be ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Net Cash Flow
A cash flow is a real or virtual movement of money: *a cash flow in its narrow sense is a payment (in a currency), especially from one central bank account to another; the term 'cash flow' is mostly used to describe payments that are expected to happen in the future, are thus uncertain and therefore need to be forecast with cash flows; *a cash flow is determined by its time ''t'', nominal amount ''N'', currency ''CCY'' and account ''A''; symbolically ''CF'' = ''CF''(''t,N,CCY,A''). * it is however popular to use ''cash flow'' in a less specified sense describing (symbolic) payments into or out of a business, project, or financial product. Cash flows are narrowly interconnected with the concepts of value, ''interest rate'' and liquidity. A cash flow that shall happen on a future day ''t''N can be transformed into a cash flow of the same value in ''t''0. Cash flow analysis Cash flows are often transformed into measures that give information e.g. on a company's value and situat ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
