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Interest tax shield |
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Interest tax shieldThe reduction in income taxes that results from the tax-deductibility of interest payments.Interest tax shield Similar MatchesDeferred interest mortgageDeferred interest mortgageInterest is not paid during the deferral period. When the period is over, the accumulated interest is added to the original loan. Some lenders add this interest to the total of your loan to give a new loan figure and new interest payments. Others calculate your interest payments on the original loan as normal and then spread the repayment of the deferred interest over a set period of time. The latter method is better for you, as adding the deferred interest to the loan means you end up paying interest on the deferred interest! Stated annual interest rateStated annual interest rateThe interest rate expressed as a per year percentage, by which interest payments are determined. See: Annual percentage rate. InterestInterestThe charge you pay if you borrow money, and the income you receive if you lend it or invest it in an income-producing bank account or in a security like a bond or a gilt. For example if you borrow £1,000 at an interest rate of 10% per year, the interest payable is £100 per year. Loans are sometimes made at fixed rates of interest, and sometimes at variable rates.If you invest £1,000 at 10%, then you as lender expect to receive £100 interest. If instead of spending the interest, you reinvest it in the same security, then at the start of the second year you will have £1,100 invested and attracting 10%, so at the end of the second year you expect to receive £110 interest. This is the principle of compound interest, where you get rolling interest on your original capital and on the reinvested income. Open interestOpen interestThe net amount of outstanding open positions, either long or short, in a given futures or options contract. Interest coverInterest coverInterest cover measures the amount of interest paid by a company on its borrowings against its operating profit in the same period.The ratio shows the impact of gearing on a company's profit and loss account. If the figure is low, a small reduction in operating profits, or a rise in the cost of borrowing, can wipe out pre-tax profits. To calculate interest cover, divide the operating profits by the interest paid.Example: a company which has profits of £4m and which pays net interest of £1m, has interest cover of 4. Further Suggestionsinsurable interestMinority interest Interest only mortgages Interest deduction interest in possession interest only mortgage Short interest Variable Interest Rate gross interest simple interest Nominal interest rate Party in interest Cash flow after interest and taxes Interest equalization tax Interest rate Term structure of interest rates interest rate swap mortgage interest relief at source Noninterest bearing note Interest Imputed interest mortgage interest deduction Interest only loan Risk Free Interest Rate Interest rate ceiling |
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