time-value-of-money

An Annuity is a finite set of level sequential cash flows. An Ordinary Annuity has a first cash flow that occurs one period from now (indexed at t = 1). An Annuity Due has a first cash flow that occurs immediately (indexed at t = 0). A Perpetuity is a perpetual annuity (a set of level...

An interest rate can be a required rate of return (aka, hurdle rate), a discount rate, and/or an opportunity cost. We can deconstruct an interest into its components where the rate, r = real risk-free interest rate + inflation premium + default risk premium + liquidity premium + maturity...

Superficially, the yield to maturity (YTM, aka yield) simply inverts the usual time value of money (TVM) inputs by solving for the yield as a function of four inputs: face (future) value, coupon (payment), maturity (time), and current price (present value). But in terms of interpretation, I...