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Calculating Bond and Stock Prices definitions

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  • Present Value
    Current worth of future cash flows discounted using a specific rate, reflecting the time value of money.
  • Future Value
    Amount a sum of money or cash flow grows to after earning interest over a period of time.
  • Time Value of Money
    Principle that a sum received today is worth more than the same sum received in the future due to its earning potential.
  • Bond Price
    Sum of the present values of all future interest payments and the principal repayment from a bond.
  • Coupon
    Periodic interest payment made to bondholders during the life of a bond.
  • Principal
    Original amount of money lent to a borrower, repaid at the end of a bond's term.
  • Discount Rate
    Interest rate used to bring future cash flows to their present value.
  • Dividend
    Portion of a company's earnings distributed to shareholders, often paid regularly.
  • Dividend Growth Rate
    Expected annual percentage increase in dividends paid by a company.
  • Stock Price
    Present value of all expected future dividends, adjusted for growth and discounted by the required rate.
  • Cash Flow
    Movement of money into or out of an investment, including interest, dividends, or principal repayments.
  • Interest Rate
    Percentage charged or earned on an amount of money, used to discount future cash flows.
  • Maturity
    Date when the principal amount of a bond is repaid to the investor.
  • Shares
    Units of ownership in a corporation, entitling holders to a portion of profits through dividends.
  • Valuation
    Process of determining the current worth of an asset based on expected future cash flows.