37670340
Description
Flashcards by Veronica Huninghake, updated more than 1 year ago
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Created by Veronica Huninghake
over 1 year ago
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| Question | Answer |
| Promissory Note | Written unconditional promise to pay a certain sum (with or without interest) at a fixed time in the future. |
| Payee | One who is named to receive the amount of the check. |
| Maker | One who writes the note. |
| Maturity Date | Date the principal and interest are due. |
| Interest-Bearing Note | Maturity value of note is greater than amount borrowed since interest is added on. |
| Face Value | Amount of insurance that is stated on the policy. It is usually the maximum amount for which the insurance company is liable. |
| Non-Interest-Bearing Note | Note where the maturity value will be equal to the amount of money borrowed since no additional interest is charged. |
| Maturity Value (MV) | Principal plus interest (if interest is charger). Represents amount due on the due date. |
| Simple Discount Note | A note in which bank deducts interest in advance. |
| Bank Discount | The amount of interest charged by a bank on a note (Maturity value x Bank discount rate x Number of days bank holds note / 360). |
| Bank Discount Rate | Percent of interest. |
| Proceeds | Maturity value less the bank charge. |
| Effective Rate | True rate of interest. The more frequent the compounding, the higher the effective rate. |
| Treasury Bill | Loan to the federal government for 91 days (13 weeks), 182 days (26 weeks), or 1 year. |
| Contingent Liability | Potential liability that may or may not result from discounting a note. |
| 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. |
| Discount Period | Amount of time to take advantage of a cash discount. |
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