The amount of one, often referred to as the 'compound amount of one', is a financial metric used to determine the future value of a single sum of money invested at a particular interest rate over a specified period.
The Annual Percentage Rate (APR) is the cost of credit that consumers pay, expressed as a simple annual percentage. It represents the annual effective interest rate charged on loans or credit and is mandated by the federal Truth in Lending Act to be disclosed in all consumer loan agreements.
The annual percentage rate (APR) represents the annualized cost of borrowing or the annual rate of return on an investment, incorporating interest rate and all associated fees.
Annual Percentage Rate (APR) is a measure of the cost of borrowing, expressed as a yearly interest rate. It includes interest as well as other fees and charges for a loan.
An annualized rate is an extrapolation of an occurrence lasting a limited time period to determine the amount or rate generated over a year. It is often used to project the yearly performance of an interest rate, investment return, or seasonal business activity such as ice cream sales.
Bank interest refers to the cost incurred by a borrower for the privilege of using funds from a financial institution. This charge is calculated based on the daily cleared overdraft balance or a committed loan, with the interest rate typically consisting of the base rate plus an additional percentage ranging from 1% to 5%.
The interest rate at which a nation's central bank lends money to domestic banks or the rate at which domestic banks can borrow from the central bank.
The base rate is the benchmark interest rate set by a nation's central bank, influencing the rates commercial banks charge borrowers and pay to depositors.
The blended rate refers to the time- and rate-weighted effective billing rate, interest rate, or tax rate, providing an average rate that incorporates varying rates and applied durations.
A ceiling on a charge; for example, an interest-rate cap would set a maximum interest rate to be charged on a loan, regardless of prevailing general interest-rate levels.
Capitalization rate, often abbreviated as cap rate, is a rate of interest or discount rate used to convert a series of future payments into a single present value. In real estate, the rate includes annual capital recovery in addition to interest.
Capitalized value represents the value at which an asset is recorded in the balance sheet of a company or organization. It is also the capital equivalent of an asset that yields a regular income, calculated at the prevailing rate of interest.
A Capped Floating-Rate Note (Capped FRN) is a type of bond that features an interest rate that fluctuates with market levels but has an upper limit or 'cap' to protect issuers against excessive interest rate rises.
A central bank provides financial and banking services for the government of a country and its commercial banking system, while also implementing the government's monetary policy.
A Certificate of Deposit (CD) is a time deposit offered by banks, credit unions, and other financial institutions with a predetermined interest rate and maturity date.
The effective overall rate of interest that a company pays on its loans, bonds, and other debts, used in calculating the total cost of capital for that firm. This is usually calculated as an after-tax figure.
An interest or cost of capital rate applied to discount factors in discounted cash flow (DCF) appraisals, used in determining the present value of future cash flows.
A provision in a mortgage that mandates the loan be paid in full when the property is sold. This clause protects lenders by ensuring the loan is not assumed by a potentially less creditworthy buyer.
Fixed-income investments are financial instruments that provide a fixed rate of return in the form of periodic interest or dividends until maturity.
A fixed-rate loan is a type of financing arrangement where the interest rate remains constant for the entire term of the loan, providing borrowers with predictable monthly payments.
A Floating-Rate Note (FRN) is a type of debt instrument with a variable interest rate that adjusts periodically based on a benchmark interest rate, such as the LIBOR or the federal funds rate.
In financial mathematics, the future worth (or value) of one per period, also known as the compound amount of one per period, is the amount of money that an investment of one monetary unit will grow to after a certain number of periods at a constant rate of interest.
Imputed interest refers to interest that is considered by tax authorities as having been paid or received even though no actual interest payment was made. It commonly applies in situations where the stated interest rate on a loan or financial instrument is considered insufficient or below market rates.
Interest is the charge applied for borrowing a sum of money, typically expressed as a percentage of the principal loan amount. Interest calculations can vary based on whether simple or compound interest is used, influencing financial decisions significantly.
The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal. It also refers to the earning rate for deposits held in a financial institution.
The Inwood Annuity Factor is a multiplier used to determine the present value of a series of periodic payments from a level-payment income stream, based on a specific interest rate.
The base interest rate defined in the loan agreement, to which the spread is added in order to establish the interest rate payable on a variable-rate loan.
A mortgage note is a legal document that states the names of the borrower and lender, the amount borrowed, the interest rate, repayment terms, and other loan provisions. While the mortgage pledges the property as collateral, the mortgage note outlines the debt and the repayment requirements.
Negative amortization is an increase in the outstanding balance of a loan resulting from the failure of periodic debt service payments to cover the required interest charged on the loan.
The interest rate at which major banks lend to one another on the overnight market, typically utilized for short-term funding. Indexes of the average overnight rate, such as SONIA and EONIA, provide key reference rates in financial markets.
A perpetual annuity, also known as perpetuity, is a financial instrument involving the receipt or payment of a constant amount annually for an indefinite period. The present value of such an annuity can be calculated using a specific formula.
Positive carry is a financial situation in which the cost of borrowing money to finance an investment is lower than the yield earned from that investment.
Today's value of an amount to be received in the future, based on a compound interest rate. For example, at a 12% interest rate, the receipt of one dollar one year from now has a present value of $0.89286.
The present value (PV) of an annuity is the current value of a series of future payments, discounted at a specific interest rate over a specific number of periods. It is a fundamental concept in finance and accounting, allowing individuals and businesses to evaluate the worth of future payments in today's terms.
The prime rate refers to the interest rate that commercial banks charge their most creditworthy customers, typically large corporations. It serves as a key benchmark in determining lending rates for consumers and businesses.
A rate is a quantity or amount measured with respect to another quantity or amount. Often used to denote interest rates, exchange rates, or other financial metrics, it serves as a basis for determining charges or payments.
The rate of interest represents the cost of borrowing money expressed as a percentage of the principal amount. It is a fundamental concept in both personal and corporate finance, impacting loans, savings, investment decisions and the overall economy.
The interest rate at which an investor can reinvest earnings from an existing investment.
Reverse leverage, also known as negative leverage, occurs when the financial benefits from ownership accrue at a lower rate than the interest rate paid for borrowed money.
The Reversionary Factor is a mathematical factor that indicates the present worth of one dollar to be received in the future. It is equivalent to the Present Value of 1.
The risk-free rate or risk-free return represents the interest rate on the safest investments, such as federal government obligations. It is a fundamental component in financial models, particularly in assessing the required return on investments.
A safe rate refers to an interest rate provided by relatively low-risk investments such as high-grade bonds or well-secured first mortgages.
Simple interest is a quick and easy method for calculating the interest charge on a loan or the interest earned on an investment, based on the principal amount, interest rate, and the time period involved.
A special type of government loan in which the terms and conditions of repayment are more generous (or softer) than they would be under normal finance circumstances. For example, the interest rate might be less and the repayment term might be for a longer period.
Straight debt is a type of debt instrument that has specific characteristics including fixed repayment terms and interest rates, with no contingencies based on the borrower's profits or convertibility into equity.
A teaser rate is an initially low interest rate applied to a mortgage loan for a limited period, which is designed as a marketing technique and is typically lower than the rate justified by the index determining the interest rate.
Terminal value (TV) is the estimated value of an investment at the end of a specified period, calculated using a given rate of interest. It represents the future worth of an initial investment assuming a specific growth rate.
Usance refers to the period allowed for the payment of a foreign bill of exchange. This term has played a crucial role in international trade finance by specifying the timeframe within which the debtor must settle their account.
A variable-rate security is a financial instrument where the interest rate is not fixed but fluctuates in response to changes in market rates.
Yield equivalence is the rate of interest at which a tax-exempt bond and a taxable security of similar quality provide the same after-tax return. This concept is essential for investors comparing tax-exempt and taxable investment options.
