Match each of the terms on the left with its definition on the right. Click on the term first and then click on the matching definition. As you match them correctly they will move to the bottom of the activity.
investment insurance present discounted value (PDV) interest principal interest rate compounding or compound interest net present value (NPV) analysis payback period nominal interest rate real interest rate expected value option value of waiting risk- certainty equivalent risk premium complete insurance or full insurance diversification actuarially fair | The amount of assets on which interest payments are made. A calculation of interest based on the sum of the original principal and the interest paid over past periods. The length of time required for an investment’s initial costs to be recouped in future benefits without discounting future flows. The purchase of capital in the present with the intent of reaping future benefits. The compensation an individual would require to bear risk without suffering a loss in expected utility. A strategy to reduce risk by combining uncertain outcomes. Description of an insurance policy with expected net payments equal to zero. A periodic payment tied to an amount of assets borrowed or lent. Rate of return expressed in terms of purchasing power. Rate of return expressed in raw currency values. The value of a future payment in terms of equivalent present- Interest expressed as a fraction of the principal. An insurance policy that leaves the insured individual equally well off regardless of the outcome. The value created if an investor can postpone his investment decision until the uncertainty about an investment’s returns is wholly or partially resolved. A payment from one economic actor to another with the aim of reducing the risk facing the payer. The probability- The use of the present discounted value to evaluate the expected long- Suffering an expected utility loss from uncertainty, or equivalently, being willing to pay to have that risk reduced. The guaranteed income level at which an individual would receive the same expected utility level as from an uncertain income. |