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. It is 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	Principal plus interest. 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 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

Resource summary

	Created by Eli Southard over 1 year ago