|
|
Interest only loan |
|
|
|
 Home Site Map Add Term Search About Us Contributors |
Interest only loanA loan in which payment of principal is deferred and interest payments are the only current obligation.Interest only loan Similar MatchesBond interest yieldBond interest yieldYield calculations on bonds aim to show the return on a gilt or bond as a percentage of either its nominal value or its current price. There are three types of yield calculation that are commonly used:Nominal YieldThis is calculated by dividing the annual income on the bond by its nomina or 'par' value. So the nominal yield on a £100 bond which pays 5% interest per year is 5/100 x 100 = 5%.Current or 'Running Yield'This is calculated by dividing the annual income on the bond by its current market price. So if the market price of the £100 bond dropped to £95, the current yield on the bond at that time would be 5/95 x 100 = 5.36%. Note that as the market price of a bond drops, its yield goes up.Redemption Yield'The Redemption Yield shows what the total return on a bond would be if held to its maturity date. It reflects not only the interest payments a bondholder will receive, but also the gain/loss he will make when it matures. The income element is the same 'current yield' calculation performed above. The gain/loss element is calculated by taking the difference between the current market price and the nominal value of the bond (e.g. in our example 100 - 95 = 5), dividing it by the number of years til maturity (assume 5 years for simplicity, so 5/5 = 1) and then dividing that figure by the current price of the bond (1/95 x 100 = 1.05%) The yield to redemption is the sum of the current yield (5.36%) and the capital yield (1.05%) = 6.41%. Variable interest rateVariable interest rateInterest rates offered by banks and financial institutions on loans or deposits which are liable to change according to circumstances. For example a movement in the interest rate set by the government would usually be an influence. Deferred interest bondDeferred interest bondA bond that pays interest at a later date, usually in one lump sum, effectively reinvesting interest earned over the life of the bond. See: Zero coupon bond. Interest expenseInterest expenseInterest expense is the money the corporation or individual pays out in interest on loans. Assumed interest rateAssumed interest rateRate of interest used by an insurance company to calculate the payout on an annuity contract. Further SuggestionsOrdinary interestTimes interest earned ratio Amortizing interest rate swap Interest in Arrears mortgage interest deduction Interest payments Unearned interest reversionary interest mortgage interest relief at source Interest rate ceiling Simple interest interest receivable simple interest Spot interest rate Risk Free Interest Rate Interest accrual rate Applied or nominal interest rate Interest on interest Party in interest insurable interest Earnings before interest, taxes, depreciation, and amortization (EBITDA) interest cover Nominal interest rate Noninterest bearing note Lessees Interest |
|
|
|