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Description
Flashcards by DANIEL OLDHAM, updated 3 months ago
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Created by DANIEL OLDHAM
3 months ago
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| Question | Answer |
| Bank discount | The amount of interest charged by a bank on a note. (Maturity Value * Bank Discount Rate * Number of days bank holds note/360). |
| Bank discount rate | Percent of interest. |
| Contingent liability | Potential liability that may or may not result from discounting a note. |
| Discount period | Amount of time to take advantage of a cash discount. |
| Discounting a note | Receiving cash from selling a note to a bank before the due date of a note. Steps to discount include (1) calculate maturity value, (2) calculate number of days bank waits for money, (3) calculate bank discount, and (4) calculate proceeds. |
| Effective rate | True rate of interest. The more frequent the compounding, the higher the effective rate. |
| Face value | Amount of insurance that is stated on the policy, usually the maximum amount for which the insurance company is liable. |
| Interest-bearing note | Maturity value of note is greater than amount borrowed since interest is added on. |
| Maker | One who writes the note. |
| Maturity date | Date the principal and interest are due. |
| Maturity value (MV) | Principal plus interest (if interest is charged). Represents amount due on the due date. |
| Non-interest-bearing note | Note where the maturity value will be equal to the amount of money borrowed since no additional interest is charged. |
| Payee | One who is named to receive the amount of the check. |
| Proceeds | Maturity value less the bank charge. |
| Promissory note | Written unconditional promise to pay a certain sum (with or without interest) at a fixed time in the future. |
| Simple discount note | A note in which bank deducts interest in advance. |
| Treasury bill | Loan to the federal government for 91 days (13 weeks), 182 days (26 weeks), or 1 year. |
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