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Business math Simple Interest and Simple Discount
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Terms in this set (23)
interest
an amount paid or earned for the use of money
simple interest
interest when a loan or investment is repaid in a lump sum
principal
the amount of money borrowed or invested
rate
the percent of the principal paid as interest per time period
time
the number of days, months or years that the money is borrowed or invested
prime interest rate
the lowest rate of interest charged by banks for short term loans to their most creditworthy customers
maturity value
the total amount of money due at the end of a loan period - the amount of the loan and the interest
ordinary interest / bankers rule
assumes 360 days per year
exact interest
assumes 365 days per year
U. S. rule
any partial loan payment first covers any interest that has accumulated. the remainder of the partial payment reduces the loan principal
adjusted principal
the remaining principal after a partial payment has been properly credited
adjusted balance due at maturity
the remaining balance due at maturity after one or more partial payments have been made
promissory note
a legal document promising to repay a loan
maker
the person or business that borrows the money
payee
the person or business loaning the money
term
the length of time for which the money is borrowed
maturity date
the date on which the loan is due to be repaid
face value
the amount borrowed
undiscounted note
another term for a simple interest note
effective interest rate for a simple discount note
the actual interest rate based on the proceeds of the loan
third party
an investment group or individual that assumes a note that was made between two other parties
third party discount note
a note that is sold to the third party (usually the bank) so that the original payee gets the proceeds immediately and the maker pays the third party the original amount at maturity
discount period
the amount of time that the third party owns the third party discounted note
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