Glossary

Double dash (double en dash) is used in this textbook to denote 'N/A' or nothing needs to be entered.

The [2ND] function key (near the top left on the BAII Plus) allows the user to access the secondary menus. Example: [2ND][PMT] accesses the BGN menu.

Take the monthly mortgage payment (P/Y=12), and divide by 2, than make this payment bi-weekly.  (P/Y=26).  This amounts to one extra monthly payment per year, which speeds up your mortgage repayment.

Ratio of cash resources to the company's short-term debts.

The process of paying off debt through regular principal and interest payments over time.

The total length of time until a loan is fully repaid.

A table (or schedule) detailing the amount of principal and interest paid during each payment as well as the balance owing after each payment.

Amortization menu in the BAII Plus. Hit 2ND PMT to access this menu.

A series of equal-sized payments, at regular intervals, over a fixed period of time.

An annuity with deposits or payments at the beginning of the payment period.

The setting in the BAII Plus to turn on when payments occur at the beginning of the payment interval.

The CESG provides 20% of the Registered Education Savings Plan (RESP) contributions of up to $2,500. That means the CESG can add a maximum of $500 to an RESP each year.

interest paid on previously earned interest as well as on the original principal.

Markup in dollars for one item

The amount of interest we must repay on the loan.

Total Variable expenses, or all the costs that go into making your item.

The regular (usually semi-annual) payment from a coupon bond.

In a bond, this is the initial interest rate used to calculate the coupon payment

Compute key on BAII Plus. Computes selected value.

To default on a loan is to fail to make the payments.  This can lead to fines, legal procedures, or items being repossessed.

An annuity where the regular payments are delayed for a period of time.

The regular payment (PMT) paid by the issuer of the preferred share.

A lump-sum payment made before you take out a loan.

The equivalent rate compunded annually

The setting in the BAII Plus to make the payments occur at the end of the payment interval.

The [ENTER] key (top left on the BAII Plus) is used to set values within the calculator's menus.

This is a mathematical term, meaning that two things are the same in the ways we want them to.  In the case of interest rates, two rates are equivalent if an investment at each rate gives the same Future Value after one year.

The Payment of an Ordinary Annuity with PV = NPV

A cost, either fixed or variable, Money Out

In a bond, this is the original purchase price, as well as final payment for the bond.

How much an item would sell for on the open market - normally, this is the PV according to today's interest rates for similar investments.

The amount the purchaser (secondary bond holder) is willing to pay for a bond.

Also can be known as the Operations Costs or Operating Expenses.  Stay the same no matter how may units are sold.

An interest rate which remains constant through the entire term, instead of fluctuating based on market conditions.

A mortgage where the interest rate charged remains fixed for the duration of the mortgage term.

The date at which we make the calcualtions.... (FIX)

An Annuity where P/Y ≠ C/Y

Revenue minus Cost of Goods (or Variable expenses) only.  The Operating expenses or Fixed Costs are not considered.

Money earned on an investment, or paid on a loan.

The rate for which the NPV = 0

Equal sized payments for a lease.

Duration of a lease (fixed time period).

Person or company holding the lease. Example: person who is leasing a car.

An annuity where we borrow an initial amount of money (PV) and we repay the loan with a series of equal-sized payments (PMT), at regular intervals, over the course of a fixed time period

The current interest rate.

The termination or ending date for which a loan, bond, or any amount borrowed must be paid back in full.

A method of solving a system of equations.

The length of time your mortgage agreement and interest rate will be in effect.

The sum of all Inflows, minus all Outflows, adjusted for time.

Percent annual rate in compound interest.

Fixed Costs

An annuity where the payments occur at the end of each payment interval.

A perpetuity where the first payment comes at the end of the first period

The ratio of Profit over Cost, (usually Gross Profit).

Periodic Compound interest rate

An annuity that has no end or an annuity with regular cash flows that continue forever.

A perpetuity where the first payment is at the beginning of the first period.

The 'payment' key within the TVM (time value of money keys) in the BAII Plus Calculator.

A preferred share has no maturity date (no expiration date or fixed term) but will stop regular payments if the company stops making a profit of goes out of business. Because we have no way of knowing when this might happen, we treat preferred shares like perpetuities and assume the profits will continue infinitely (forever).

The selling price, fair market value or the amount the purchaser is willing to pay.

The original amount of money invested or borrowed.

The difference between the revenues (sales) and expenses (cost of goods and operating costs).

A new mortgage is drawn up at the end of each term when a mortgage holder (buyer) renews their mortgage.

Size of final lease payment required. Example: final payment required to own a car at the end of the car lease.

Registered Education Savings Plan

Registered Retirement Savings Plan

A bond holder who has purchased a bond(s) from either the original bond holder or another secondary bond holder.

Sells for a price lower than the original purchase price.

Sells for a higher selling price than the original purchase price.

Payments that occur twice per year or once every six months.

An annuity where the payment frequency (P/Y) is equal to the compounding frequency (C/Y).

Interest earned without any compounding, that is interest paid only on the principal.

A number of equations, involving the same variables

The amount of time between when the bond is issued and when the bond matures.

The value of goods sold divided by the average value of goods in stock

Time Value of Money keys. These are the N, I/Y, PV, PMT and FV keys on the BAII Plus.

Costs that vary based on how many items are made and sold.

the interest rate varies throughout the mortgage term