A comparison between Simple and Compound Interest.



  • Definition: The field that studies how people make decisions regarding the allocation of resources over time and the handling of risk.
  • What It Means:

Present Value

  • Definition: The amount of money today that would be needed, using prevailing interest rates, to produce a given future amount of money.
  • What It Means:

Future Value

  • Definition: The amount of money in the future that an amount of money today will yield, given prevailing interest rates.
  • What It Means:


  • Definition: The accumulation of a sum of money in, say, a bank account, where the interest earned remains in the account to earn additional interest in the future.
  • What It Means:

Risk Aversion

  • Definition: A dislike of uncertainty.
  • What It Means:


  • Definition: The reduction of risk achieved by replacing a single risk with a large number of smaller, unrelated risks.
  • What It Means:

Firm-Specific Risk

  • Definition: Risk that affects only a single company.
  • What It Means:

Market Risk

  • Definition: Risk that affects all companies in the stock together.
  • What It Means:

Fundamental Analysis

  • Definition: The study of a company's accounting statements and future prospects to determine its value.
  • What It Means:

Efficient Markets Hypothesis

  • Definition: The theory that asset prices reflect all publicly available information about the value of an asset.
  • What It Means:

Informational Efficiency

  • Definition: The description of asset prices that rationally reflect all available information.
  • What It Means:

Random Walk

  • Definition: The path of a variable whose changes are impossible to predict.
  • What It Means:


thumb|500px|right|Simple and Compound Interest, as seen in class.thumb|500px|right|Invest sooner rather than later.thumb|500px|right|The Rule of 70, as seen in class.thumb|500px|right|Rule of 70 Part 2: Doubling Time. As seen in class.