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Practical Business Math Procedures - Chapter 11 Key Terms Flash Cards
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- 1Bank discountThe amount of interest charged by a bank on a note. (Maturity Value * Bank Discount Rate * Number of days bank holds note/360).
- 2Bank discount ratePercent of interest.
- 3Contingent liabilityPotential liability that may or may not result from discounting a note.
- 4Discount periodAmount of time to take advantage of a cash discount.
- 5Discounting a noteReceiving 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.
- 6Effective rateTrue rate of interest. The more frequent the compounding, the higher the effective rate.
- 7Face valueAmount of insurance that is stated on the policy, usually the maximum amount for which the insurance company is liable.
- 8Interest-bearing noteMaturity value of note is greater than amount borrowed since interest is added on.
- 9MakerOne who writes the note.
- 10Maturity dateDate the principal and interest are due.
- 11Maturity value (MV)Principal plus interest (if interest is charged). Represents amount due on the due date.
- 12Non-interest-bearing noteNote where the maturity value will be equal to the amount of money borrowed since no additional interest is charged.
- 13PayeeOne who is named to receive the amount of the check.
- 14ProceedsMaturity value less the bank charge.
- 15Promissory noteWritten unconditional promise to pay a certain sum (with or without interest) at a fixed time in the future.
- 16Simple discount noteA note in which bank deducts interest in advance.
- 17Treasury billLoan to the federal government for 91 days (13 weeks), 182 days (26 weeks), or 1 year.
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- Flash cards for the Key Terms section of Practical Business Math Procedures Chapter 11.
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- DANIEL OLDHAM
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