Simple interest is always stated in terms of years or annual rates. If Johnny takes out a loan of 10 USD and there’s a 20 percent rate on that loan, Johnny will owe $2 in interest at the end of the year ($10 principal x 20% = $2). If Johnny does not pay the principle after...
1 To be well-informed when doing so, you’re going to need to understand the meaning of “interest rate”: what an interest rate is, how interest is charged, and what factors influence interest rates. Let’s get started.What Does Interest Rate Mean? Interest is the amount of money ...
When the first monthly payment is due, Barb would debit notes payable for the principle amount paid, debit interest expense for the 10 percent interest charged for the period, and credit cash for the total payment amount.The bank, on the other hand, would record Barb’s payment by debiting...
Interest rate is the percentage of interest that is applied to an investment, loan, or deposit over a specific period of time. It is essentially the cost of borrowing money or the reward for lending money. In the context ofCertificates of Deposit(CDs), the interest rate determines the additi...
Variable interest rates are based on the national interest rate or bank rate set by the Bank of England. Some businesses may prefer to take their chances with this type of rate, as it can go down as well as up, meaning that they may get away with paying less. There is no guarantee ...
The times interest earned (TIE) ratio is a measure of a company's ability to meet its debt obligations based on its current income.
Explain the risks of the interest rate swap position and should it be hedged in this scenario? What impact might it have on the rest of the portfolio? Define or describe the following: Capital Asset Pricing Model (CAPM). What is th...
How much is the effective or market interest rate on a bond that has a face value of $1,000, is selling at a price of $1,600 and pays $80 interest? What is the real interest rate if the nominal interest rate is 3% and the inflation rate is 1%?
If the nominal interest rate is 7% per year and the inflation rate is 2% per year, what is the exact real rate of return? Nominal and Real Interest Rate: The interest rate quoted on a financial asset is usually the nominal interest rate. One ...
Personal loans are typically unsecured loans, meaning they don't require collateral. Borrowers receive a lump sum of money from a lender and agree to repay it over a set period, usually in fixed monthly installments. The interest rate on the loan determines how much you'll pay in addition ...