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effective interest rate
formula
net interest cost divided by the net available proceeds TERM 2
net available
proceeds
DEFINITION 2 loan minus the increase in the compensating balance TERM 3
net interest cost
DEFINITION 3 gross interest cost minus the incremental interest revenue TERM 4
gross interest cost
DEFINITION 4 loan amount x annual rate x(6 months/12 months) TERM 5
incremental interest revenue
DEFINITION 5 balance in the account(checking) x annual rate of account x (6months/12 months)
interest factor for future value of a present
sum
(the amount invested for a period of time/the present value of that amount invested after a period of time)x the amount invested for that period of time. TERM 7
annuity due
DEFINITION 7 the first annuity payment is due immediately-According to GAAP, an interest rate must be imputed to arrive at the present value of the machinery. TERM 8
ordinary annuity
DEFINITION 8 each payment is due at the end of the period TERM 9
cost of machine to entity of year
DEFINITION 9 is the present value of the payment to be made on 9/1/year
TERM 10
Compute present value
DEFINITION 10 todays price, the future payment is multiplied by the present value of 1 dollar for two periods at 10 percent
calculate present value of an annuity due of 1
dollar for 5 periods
take present value of an ordinary annuity of 1 dollar for four periods and add 1.a special table for an annuity due can be used TERM 17
when are payments made in an annuity due
DEFINITION 17 the first payment is made at the beginning of the first period and is therefore not discounted. TERM 18
when are payments made in an ordinary
annuity
DEFINITION 18 the first payment is made at the end of the first period and therefore is discounted. TERM 19
annuity due, what special occurence
DEFINITION 19 the first payment is included int he computation at face value TERM 20
calculate present value factor
DEFINITION 20 full cost of equipment( present valueminus:first payment, due immediatelyamount financed(present value of an rodinary annuity of four 4000 payments)divided by periodic paymentpresent value facotr
