38855228
Description
Flashcards by Brooke Young, updated 11 months ago
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Created by Brooke Young
11 months 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 charged). Represents amount due on the due date |
| Simple note discount | A note in which bank deducts interest in advance |
| Bank discount | The amount of interest charged by a bank on a note (Maturity value × Bank discount rate × 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 |
| Bank discount | The amount of interest charged by a bank on a note (Maturity value × Bank discount rate × Number of days bank holds note ÷ 360) |
| Proceeds | Maturity value less the bank charge |
| Discount period | Amount of time to take advantage of a cash discount |
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