V
Money today can be worth more than the same amount of money in the future because today's money can potentially earn a return
Time Value of Money (TVM)
The original amount of money invested, saved, or borrowed
Principal
The money gained or lost from an investment
Return
The possibility that an investment will lose money or not perform as expected
Risk
A collection of investments owned by a person or organization.
Portfolio
The percentage used to calculate how much interest is earned or charged
Interest Rate
The general increase in prices over time, which reduces the purchasing power of money
Inflation
Spreading your money among different investments to reduce the impact of one investment performing poorly
Diversification
Something you put money into with the hope of earning money or increasing in value
Investment
Something that has financial value
Asset
The amount of money required to purchase or accomplish something
Cost
What you receive or gain from a decision
Benefit
Money earned on savings/investments or money paid for borrowing money
Interest
What a future amount of money is worth today
Present Value (PV)
Earning interest on your original money and on previously earned interest
Compounding
How much risk a person is comfortable taking
Risk Tolerance
Deciding how much money to put into different types of investments
Asset Allocation
Something you want to accomplish with your money
Financial Goal
An investment representing ownership in a company
Stock
What you give up when you choose one option instead of another
Opportunity Cost
A type of investment where an investor lends money to a government, company, or other organization
Bond
A group of investments with similar characteristics, such as stocks, bonds, or cash
Asset Class
What money you have today could be worth in the future
Future Value (FV)
The idea that investments with greater potential returns generally involve greater risk
Risk vs. Return
How quickly and easily an asset can be converted to cash without a major loss in value
Liquidity
Risk that affects the overall market and cannot be eliminated simply by diversification
Systematic Risk
Identifying what could go wrong and determining how serious the risk could be
Risk Assessment
The return a business needs to earn to make an investment or project worthwhile
Cost of Capital
Risk connected to a specific company or investment that can potentially be reduced through diversification
Evaluating major, long-term investments or projects to decide whether they are worth the cost
Capital Budgeting