Chapter 3 Flashcards
From the viewpoint of the ____, interest is the amount of money paid for the use of borrowed capital
Borrower
It is the amount of money paid for the use of borrowed capital
Interest
For the ____, interest is the income produced by the money which he has lent
Lender
The interest on borrowed money is said to be _____ if the interest to be paid is directly proportional to the length of time the amount or principal is borrowed
Simple Interest
It is the amount of money borrowed and on which interest is charged
Principal
It is the amount earned by one unit of principal during a unit of time
Rate of Interest
It is computed on the basis of one banker’s year
Ordinary simple interest
1 banker’s year is equivalent to ______
12 months, each consisting of 30 days,
360 days
It is based on the exact number of days, 365 for an ordinary year and 366 days for a leap year
Exact simple interest
The leap years are those which are
exactly divisible by 4 but excluding the century years
The interest earned by the principal is not paid at the end of each interest period, but is considered as added to the principal, and therefore will also earn interest for the succeeding periods
Compound Interest
For compound interest, the rate of interest usually quoted is _____ of interest which specifies the rate of interest and the number of interest periods per year
Nominal rate of interest
It is the actual rate of interest on the principal for one year
Effective rate of interest
On a negotiable paper is the difference between what it is worth in the future and its present worth
Discount
