# Financial Math Glossary

Important mathematical terms to know

Important mathematical terms to know

This financial math glossary covers the most important terms and definitions required for a career as a financial analyst. This list is taken from CFI’s Financial Mathematics Course.

An annuity is a series of payments in equal time periods, guaranteed for a fixed number of years.

The present value of $1 paid for each of t periods.

An average calculated by adding the value of the points in a data set and dividing the sum by the number of data points.

A constant stream of identical cash flows without end.

A statistical measure of how two securities move in relation to each other.

Coupon Rate is the amount of interest received by a bond investor expressed on a nominal annual basis.

A statistical measure of the variance of two random variables that are observed or measured in the same mean time period.

The coupon from a bond divided by the market price of the bond, expressed as a percentage.

The percentage rate required to calculate the present value of a future cash flow.

A constant stream of cash flows without end that is expected to rise indefinitely.

Mean of time series data (observations equally spaced in time) from several consecutive periods. Called ‘moving’ because it is continually recomputed as new data becomes available.

Par Value is the amount returned to the bond investor by the issuer upon maturity.

R-Squared is a statistical term saying how good one term is at predicting another. Generally, a higher value of R-Squared means that you can better predict one term from another.

A statistical methodology that attempts to determine the strength of the relationship between one dependent variable (usually denoted by Y) and a series of other changing variables (known as independent variables).

A measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is calculated as the square root of variance.

The Sum of Squares Regression (SSR) measures how much variation there is in the modelled values and this is compared to the Total Sum of Squares (SST), which measures how much variation there is in observed data, and to the Sum of Squares Residual (SSE), which measures the variation in the modelling errors.

The concept holds that a specific sum of money is more valuable the sooner it is received. Time value of money is dependent not only on the time interval being considered but also the rate of discount used in calculating current or future values.

Variance is a measure of the dispersion of a set of data points around their mean value. It is a mathematical expectation of the average squared deviations from the mean.

An average in which some values count for more than others.

The annual return earned by a bond investor if purchasing a bond today and holding it until maturity.

This financial math glossary covered important terms and definitions for performing financial analysis. Now you’re ready to take CFI’s Financial Mathematics Course. To continue learning and advancing your career, these resources will also be helpful:

Get world-class financial training with CFI’s online certified financial analyst training program!

Gain the confidence you need to move up the ladder in a high powered corporate finance career path.

Learn financial modeling and valuation in Excel the *easy way*, with step-by-step training.