
Glossary


A

Accrued InterestInterest earned but not collected.

Addon 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 “addedon” 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, writeoff 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—TruthinLending).


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 redemption 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.

