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ADF (annuity discount factor) |
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Definition of ADF (annuity discount factor)ADF (annuity discount factor)the present value of a finite stream of cash flows for every beginning $1 of cash flow.
Related Terms:DLOC (discount for lack of control)an amount or percentage deducted from a pro rata share of the value of 100% of an equity interest in a business, to reflect the absence of some or all of the powers of control. DLOM (discount for lack of marketability)an amount or percentage deducted from an equity interest to reflect lack of marketability. discount ratethe rate of return on investment that would be required by a prudent investor to invest in an asset with a specific level risk. Also, a rate of return used to convert a monetary sum, payable or receivable in the future, into present value. fractional interest discountthe combined discounts for lack of control and marketability. g the constant growth rate in cash flows or net income used in the adf, Gordon model, or present value factor. PPF (periodic perpetuity factor)a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity. QMDM (quantitative marketability discount model)model for calculating DLOM for minority interests r the discount rate Accretion (of a discount)In portfolio accounting, a straight-line accumulation of capital gains on discount Amortization factorThe pool factor implied by the scheduled amortization assuming no prepayemts. AnnuityA regular periodic payment made by an insurance company to a policyholder for a specified period Annuity dueAn annuity with n payments, wherein the first payment is made at time t = 0 and the last Annuity factorPresent value of $1 paid for each of t periods. Annuity in arrearsAn annuity with a first payment on full period hence, rather than immediately. Bank discount basisA convention used for quoting bids and offers for treasury bills in terms of annualized Cash discountAn incentive offered to purchasers of a firm's product for payment within a specified time Conversion factorsRules set by the Chicago Board of Trade for determining the invoice price of each Deep-discount bondA bond issued with a very low coupon or no coupon and selling at a price far below par Deferred nominal life annuityA monthly fixed-dollar payment beginning at retirement age. It is nominal DiscountReferring to the selling price of a bond, a price below its par value. Related: premium. Discount bondDebt sold for less than its principal value. If a discount bond pays no interest, it is called a Discount factorPresent value of $1 received at a stated future date. Discount periodThe period during which a customer can deduct the discount from the net amount of the bill Discount rateThe interest rate that the Federal Reserve charges a bank to borrow funds when a bank is Discount securitiesNon-interest-bearing money market instruments that are issued at a discount and Discount windowFacility provided by the Fed enabling member banks to borrow reserves against collateral Discounted basisSelling something on a discounted basis is selling below what its value will be at maturity, Discounted cash flow (DCF)Future cash flows multiplied by discount factors to obtain present values. Discounted dividend model (DDM)A formula to estimate the intrinsic value of a firm by figuring the Discounted payback period ruleAn investment decision rule in which the cash flows are discounted at an DiscountingCalculating the present value of a future amount. The process is opposite to compounding. Dividend discount model (DDM)A model for valuing the common stock of a company, based on the Documented discount notesCommercial paper backed by normal bank lines plus a letter of credit from a Equivalent annual annuityThe equivalent amount per year for some number of years that has a present FactorA financial institution that buys a firm's accounts receivables and collects the debt. Factor analysisA statistical procedure that seeks to explain a certain phenomenon, such as the return on a Factor modelA way of decomposing the factors that influence a security's rate of return into common and Factor portfolioA well-diversified portfolio constructed to have a beta of 1.0 on one factor and a beta of FactoringSale of a firm's accounts receivable to a financial institution known as a factor. Forward discountA currency trades at a forward discount when its forward price is lower than its spot price. Maturity factoringfactoring arrangement that provides collection and insurance of accounts receivable. Multifactor CAPMA version of the capital asset pricing model derived by Merton that includes extramarket Net benefit to leverage factorA linear approximation of a factor, T*, that enables one to operationalize the Normal annuity formThe manner in which retirement benefits are paid out. Old-line factoringfactoring arrangement that provides collection, insurance, and finance for accounts receivable. One-factor APTA special case of the arbitrage pricing theory that is derived from the one-factor model by Original issue discount debt (OID debt)Debt that is initially offered at a price below par. Pool factorThe outstanding principal balance divided by the original principal balance with the result Present value factorfactor used to calculate an estimate of the present value of an amount to be received in Pure-discount bondA bond that will make only one payment of principal and interest. Also called a zerocoupon RAMs (Reverse-annuity mortgages)Mortgages in which the bank makes a loan for an amount equal to a Reported factorThe pool factor as reported by the bond buyer for a given amortization period. Single factor modelA model of security returns that acknowledges only one common factor. Single-premium deferred annuityAn insurance policy bought by the sponsor of a pension plan for a single Two-factor modelBlack's zero-beta version of the capital asset pricing model. Discounted cash flow (DCF)A method of investment appraisal that discounts future cash flows to present value using a discount rate, which is the risk-adjusted cost of capital. Limiting factorThe production resource that, as a result of scarce resources, limits the production of goods Purchase discountsA contra account that reduces purchases by the amount of the discounts taken for early payment. Sales discountsA contra account that offsets revenue. It represents the amount of the discounts for early payment allowed on sales. discounted cash flow (DCF)Refers to a capital investment analysis technique AnnuityA series of payments or deposits of equal size spaced evenly over Annuity Dueannuity where the payments are to be made at the beginning of Continuous DiscountingThe process of calculating the present value of a stream of future Discount RateThe rate of interest used to calculate the present value of a stream DiscountingThe process of calculating the present value of a stream of future Ordinary AnnuityAn annuity where the payments are made at the end of each ad hoc discounta price concession made under competitive pressure (real or imagined) that does not relate to quantity purchased annuity duea series of equal cash flows being received or paid at the beginning of a period critical success factors (CSF)any item (such as quality, customer discountingthe process of reducing future cash flows to present value amounts discount ratethe rate of return used to discount future cash ordinary annuitya series of equal cash flows being received risk-adjusted discount rate methoda formal method of adjusting for risk in which the decision maker increases the rate used for discounting the future cash flows to compensate for increased risk AnnuityA series of payments over a period of time. The payments are usually Discount curveThe curve of discount rates vs. maturity dates for bonds. Discounted cash flowA technique that determines the present value of future cash FactoringThe sale of accounts receivable to a third party, with the third party bearing Factory overheadAll the costs incurred during the manufacturing process, minus the Sales discountA reduction in the price of a product or service that is offered by the annuityEqually spaced level stream of cash flows. annuity dueLevel stream of cash flows starting immediately. annuity factorPresent value of an annuity of $1 per period. constant-growth dividend discount modelVersion of the dividend discount model in which dividends grow at a constant rate. discount factorPresent value of a $1 future payment. discount rateInterest rate used to compute present values of future cash flows. dividend discount modelComputation of today’s stock price which states that share value equals the present value of all expected future dividends. DiscountThe percentage amount at which bonds sell below their par value. Also the percentage amount at which a currency sells on the forward market below its current rate on the spot market. Discount BondA bond with no coupons, priced below its face value; the return on this bond comes from the difference between its face value and its current price. DiscountingCalculating the present value of a future payment. Discount RateThe interest rate at which the Fed is prepared to loan reserves to commercial banks. Discount WindowThe Federal Reserve facility at which reserves are loaned to banks at the discount rate. Factor of ProductionA resource used to produce a good or service. The main macroeconomic factors of production are capital and labor. Individual Retirement AnnuityAn IRA comprised of an annuity that is managed FactoringThe discounting, or sale at a discount, of receivables on a nonrecourse, notification Scrap factorAn anticipated loss percentage included in the bill of material and Shrinkage factorThe expected loss of some proportion of an item during the AnnuityA contract which provides an income for a specified period of time, such as a certain number of years or for life. An annuity is like a life insurance policy in reverse. The purchaser gives the life insurance company a lump sum of money and the life insurance company pays the purchaser a regular income, usually monthly. Back To Back AnnuityThis term refers to the simultaneous issue of a life annuity with a non-guaranteed period and a guaranteed life insurance policy [usually whole life or term to 100]. The face value of the life insurance would be the same amount that was used to purchase the annuity. This combination of life annuity providing the highest payout of all types of annuities, along with a guaranteed life insurance policy allowed an uninsurable person to convert his/her RRSP into the best choice of annuity and guarantee that upon his/her death, the full value of the annuity would be paid tax free through the life insurance policy to his family members. However, in the early 1990's, the Federal tax authorities put a stop to the issuing of standard life rates to rated or uninsurable applicants. Insuring a life annuity in this manner is still an excellent way to provide guaranteed tax free funds to family members but the application for the annuity and the application for the life insurance are separate transactions and today, most likely conducted through two different insurance companies so that there is no suspicion of preferential treatment given to the life insurance application. Deferred AnnuityAn annuity providing for income payments to commence at a specified future time. Non-Smoker DiscountIn October 1996 it was announced in the international news that scientists had finally located the link between cigarette smoking and lung cancer. In the early 1980's, some Canadian Life Insurance Companies had already started recognizing that non-smokers had a better life expectancy than smokers so commenced offering premium discounts for life insurance to new applicants who have been non-smokers for at least 12 months before applying for coverage. Today, most life insurance companies offer these discounts. Discount RateA rate of return used to convert a monetary sum, payable or receivable in the future, into present value.
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