Flashcards
Chapter 11 Key Terms
Cards in this deck (17)
- 1Bank DiscountThe amount of interest charged by a bank on a note
- 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 include; 1. calculate maturity value 2. calculate number of days bank waits for money 3. calculate bank discount 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. It is 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 ValuePrincipal plus interest. 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 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, 182 days, or 1 year