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Interest Factor |
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Definition of Interest FactorInterest FactorNumbers found in compound interest and annuity tables. Usually called the FVIF or PVIF.
Related Terms:Future ValueThe amount to which a payment or series of payments will grow by a given future date when compounded by a given interest rate. FVIF future value interest factor. ADF (annuity discount factor)the present value of a finite stream of cash flows for every beginning $1 of cash flow. fractional interest discountthe combined discounts for lack of control and marketability. g the constant growth rate in cash flows or net income used in the ADF, Gordon model, or present value factor. PPF (periodic perpetuity factor)a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity. Accrued interestThe accumulated coupon interest earned but not yet paid to the seller of a bond by the Amortization factorThe pool factor implied by the scheduled amortization assuming no prepayemts. Amortizing interest rate swapSwap in which the principal or national amount rises (falls) as interest rates Annuity factorPresent value of $1 paid for each of t periods. Base interest rateRelated: Benchmark interest rate. Benchmark interest rateAlso called the base interest rate, it is the minimum interest rate investors will Best-interests-of-creditors testThe requirement that a claim holder voting against a plan of reorganization Capitalized interestinterest that is not immediately expensed, but rather is considered as an asset and is then Cash flow after interest and taxesNet income plus depreciation. Compound interestinterest paid on previously earned interest as well as on the principal. Conversion factorsRules set by the Chicago Board of Trade for determining the invoice price of each Covered interest arbitrageA portfolio manager invests dollars in an instrument denominated in a foreign Discount factorPresent value of $1 received at a stated future date. Earnings before interest and taxes (EBIT)A financial measure defined as revenues less cost of goods sold Effective annual interest rateAn annual measure of the time value of money that fully reflects the effects of Equilibrium rate of interestThe interest rate that clears the market. Also called the market-clearing interest FactorA financial institution that buys a firm's accounts receivables and collects the debt. Factor analysisA statistical procedure that seeks to explain a certain phenomenon, such as the return on a Factor modelA way of decomposing the factors that influence a security's rate of return into common and Factor portfolioA well-diversified portfolio constructed to have a beta of 1.0 on one factor and a beta of FactoringSale of a firm's accounts receivable to a financial institution known as a factor. Forward interest rateinterest rate fixed today on a loan to be made at some future date. Gross interestinterest earned before taxes are deducted. InterestThe price paid for borrowing money. It is expressed as a percentage rate over a period of time and Interest coverage ratioThe ratio of the earnings before interest and taxes to the annual interest expense. This Interest coverage testA debt limitation that prohibits the issuance of additional long-term debt if the issuer's Interest equalization taxTax on foreign investment by residents of the U.S. which was abolished in 1974. Interest paymentsContractual debt payments based on the coupon rate of interest and the principal amount. Interest on interestinterest earned on reinvestment of each interest payment on money invested. Interest-only strip (IO)A security based solely on the interest payments form a pool of mortgages, Treasury Interest rate agreementAn agreement whereby one party, for an upfront premium, agrees to compensate the Interest rate capAlso called an interest rate ceiling, an interest rate agreement in which payments are made Interest rate ceilingRelated: interest rate cap. Interest rate floorAn interest rate agreement in which payments are made when the reference rate falls Interest rate on debtThe firm's cost of debt capital. Interest rate parity theoreminterest rate differential between two countries is equal to the difference Interest rate riskThe risk that a security's value changes due to a change in interest rates. For example, a Interest rate swapA binding agreement between counterparties to exchange periodic interest payments on Interest subsidyA firm's deduction of the interest payments on its debt from its earnings before it calculates Interest tax shieldThe reduction in income taxes that results from the tax-deductibility of interest payments. Maturity factoringfactoring arrangement that provides collection and insurance of accounts receivable. Multifactor CAPMA version of the capital asset pricing model derived by Merton that includes extramarket Net benefit to leverage factorA linear approximation of a factor, T*, that enables one to operationalize the Nominal interest rateThe interest rate unadjusted for inflation. Old-line factoringfactoring arrangement that provides collection, insurance, and finance for accounts receivable. One-factor APTA special case of the arbitrage pricing theory that is derived from the one-factor model by Open interestThe total number of derivative contracts traded that not yet been liquidated either by an Pool factorThe outstanding principal balance divided by the original principal balance with the result Pooling of interestsAn accounting method for reporting acquisitions accomplished through the use of equity. Present value factorfactor used to calculate an estimate of the present value of an amount to be received in Rate of interestThe rate, as a proportion of the principal, at which interest is computed. Real interest rateThe rate of interest excluding the effect of inflation; that is, the rate that is earned in terms Reported factorThe pool factor as reported by the bond buyer for a given amortization period. Short interestThis is the total number of shares of a security that investors have borrowed, then sold in the Single factor modelA model of security returns that acknowledges only one common factor. Simple interestinterest calculated only on the initial investment. Related:compound interest. Spot interest rateinterest rate fixed today on a loan that is made today. Related: forward interest rates. Stated annual interest rateThe interest rate expressed as a per annum percentage, by which interest Times-interest-earned ratioEarnings before interest and tax, divided by interest payments. True interest costFor a security such as commercial paper that is sold on a discount basis, the coupon rate Two-factor modelBlack's zero-beta version of the capital asset pricing model. Earnings before interest and taxes (EBIT)The operating profit before deducting interest and tax. Earnings before interest, taxes, depreciation and amortization (EBITDA)The operating profit before deducting interest, tax, depreciation and amortization. InterestThe cost of money, received on investments or paid on borrowings. Limiting factorThe production resource that, as a result of scarce resources, limits the production of goods Profit before interest and taxes (PBIT)See EBIT. Interest incomeIncome that a company receives in the form of interest, usually as the result of keeping money in interest-bearing accounts at financial institutions and the lending of money to other companies. Interest payableThe amount of interest that is owed but has not been paid at the end of a period. earnings before interest and income tax (EBIT)A measure of profit that times interest earnedA ratio that tests the ability of a business to make Accrued InterestThe amount of interest accumulated on a debt security between Compound Interestinterest paid on principal and on interest earned in previous Effective Interest RateThe rate of interest actually earned on an investment. It is Nominal Interest RateThe rate of interest quoted, or stated, to be paid on a security Real Interest RateThe rate of interest paid on an investment adjusted for inflation Simple Interestinterest paid only on the principal; calculated by multiplying the Times Interest Earned RatioA measure of how well a company is able to meet its interest compound interesta method of determining interest in which interest that was earned in prior periods is added to the original investment so that, in each successive period, interest is earned on both principal and interest critical success factors (CSF)any item (such as quality, customer simple interesta method of determining interest in which interest is earned only on the original investment (or principal) amount FactoringThe sale of accounts receivable to a third party, with the third party bearing Factory overheadAll the costs incurred during the manufacturing process, minus the InterestThe cost of funds loaned to an entity. It can also refer to the equity ownership Pooling of interestsAn method for accounting for a business combination. When used, the expenses of the combination are charged against income at once, and the net annuity factorPresent value of an annuity of $1 per period. compound interestinterest earned on interest. discount factorPresent value of a $1 future payment. effective annual interest rateinterest rate that is annualized using compound interest. interest rate parityTheory that forward premium equals interest rate differential. interest tax shieldTax savings resulting from deductibility of interest payments. nominal interest rateRate at which money invested grows. real interest rateRate at which the purchasing power of an investment increases. simple interestinterest earned only on the original investment; no interest is earned on interest. Factor of ProductionA resource used to produce a good or service. The main macroeconomic factors of production are capital and labor. Interest Rate DifferentialThe interest rate on our financial assets minus the interest rate on a foreign country's financial assets.
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