Glossary

A

 

Accrued InterestInterest earned but not collected.

Add-on Interest RateA term used in consumer finance to represent a particular method of calculating a finance charge. That is, when a loan is made a year’s simple interest is “added-on” to the principal amount for each year of the life of the loan.

AmortizationThe gradual reduction of any amount over a period of time. A general term which includes various specific practices such as depreciation, depletion, write-off of intangibles, prepaid expenses, and deferred charges.

AnnuityA series or one of a series of equal payments at fixed intervals; the right to receive such payments.

APRAnnual Percentage Rate. Actual cost of a loan expressed as annual percent rate as required by U. S. Federal Reserve (Reg. Z—Truth-in-Lending).

B

 

BondA certificate of indebtedness in writing and often under seal.

Bond PriceThe price an investor is willing to pay for a bond. Involved is the determination of a value based on the redemptioIi price of a bond when held to maturity or earlier date, the nominal or coupon rate of interest, and the effective rate or desired yield.

Bond YieldThe effective annual rate of return to an investor when a bond is bought at a given price, pays a nominal or stated coupon rate and is held to maturity or earlier date.

C

 

Callable BondA type of bond permitting the issuer to pay the obligation before maturity by giving notice of redemption in a manner specified in the indenture.

Chain DiscountA series of trade discount percentages or their total.

Compound InterestInterest resulting from the periodic addition of simple interest to principal, the new base thus established being the principal for the computation of interest for the following period.

Coupon RateThe rate at which dividends are paid to the bond holder expressed as an annual percent of the bond’s face value, or par.

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