Chapter 11 Key Terms

Question	Answer
Bank Discount	The amount of interest charged by a bank on a note.
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 include; 1. calculate maturity value 2. calculate number of days bank waits for money 3. calculate bank discount 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.
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)
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 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, 182 days, or 1 year.

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	Created by MYKALA ERDKAMP over 7 years ago