301 CH 6

How is the principal amount of an interest-only loan repaid?

The principal is repaid in a lump sum at the end of the loan period.

Which one of the following terms is used to describe a loan wherein each payment is equal in amount and includes both interest and principal?

amortized loan

What is the interest rate charged per period multiplied by the number of periods per year called?

annual percentage rate

Which one of the following terms is defined as a loan wherein the regular payments, including both interest and principal amounts, are insufficient to retire the entire loan amount, which then must be repaid in one lump sum?

balloon loan

Which one of the following terms is used to identify a British perpetuity?

consol

A monthly interest rate expressed as an annual rate would be an example of which one of the following rates?

effective annual rate

An ordinary annuity is best defined by which one of the following?

equal payments paid at regular intervals over a stated time period

Which one of the following terms is used to describe a loan that calls for periodic interest payments and a lump sum principal payment?

interest-only loan

An amortized loan:

may have equal or increasing amounts applied to the principal from each loan payment.

A loan where the borrower receives money today and repays a single lump sum on a future date is called a(n) _____ loan

pure discount

Which one of the following accurately defines a perpetuity?

unending equal payments paid at equal time intervals