unanswered Insurance. Operating activities c. Financing activities b. Interest expense is a non-operating expense shown on the income statement. The face value of a bond can be thought of as its principal. This number tells you how much you pay per year and may include additional costs above and beyond the interest charges. Generally, the interest payment is related to the principal amount that is owed to the lender. Consider the following example. Most lenders, such as those issuing car loans or mortgages, expect regular monthly payments that include interest and principal payments. Example of Loan Payment. These regular monthly payments function like an annuity. Example of Accrued Interest . Additional costs: Loans are often quoted with an annual percentage rate (APR). Lending activities d. Financing activities 34. Dividend payments to owners should be classified as cash outflows for a. Coins, c. Savings deposits, d. Checkable deposits. It represents interest payable on any borrowings – bonds, loans, convertible debt or lines of credit. Operating activities c. Borrowing activities b. Throw in the 10% down payment, and the car costs $38,497. $_____million. An interest payment is based upon the annual interest rate and the principal amount outstanding for the period. Conversely, some cash flows relating to operating activities are classified as investing and financing activities. Multiply the result times the principal outstanding. As a result, your payments will vary as well (as long as your payments are blended with principal and interest). Let us assume there is a $20,000 loan receivable, with an interest rate of 15%, on which payment has … Therefore, the next interest payment will be smaller than the previous interest payment. The world of bonds has its own unique terminology, and understanding these terms are necessary to be able to not only properly invest in bonds, but to calculate the interest payment of a bond. C) unit of account. Your pure interest cost is the interest rate (not the APR). These items together—currency, and checking accounts in banks—make up the definition of money known as M1, which is measured daily by the Federal Reserve System. Time deposits differ from at call deposits, such as savings or checking accounts, which can be withdrawn at any time, without any notice or penalty. Presuming that you are making interest payments only on a term loan, divide the interest rate stated in the loan documents by the number of payments made in a year. Whenever a principal payment occurs, the balance of the principal amount owed will decrease. You would pay $35,131.80 in monthly payments. Learn the terminology for calculating a bond's interest payments. A time deposit or term deposit (in the United States also known as a certificate of deposit) is a deposit in a financial institution with a specific maturity date or a period to maturity, commonly referred to as its “term”. 33. Interest payments to lenders and other creditors should be classified as cash outflows for a. time deposits. Show transcribed image text. Because you're reducing the principal balance every month, the amount of interest that accumulates is likewise reduced. Answer: E . C) traveler's checks . Face (or par) value. The monthly payment on a five-year loan for $30,287 at 6% interest would be $585.53. For example, receipts of investment income (interest and dividends) and payments of interest to lenders are classified as investing or financing activities. It … Investing activities d. Ordinary activities 35. Owners should be classified as cash outflows for a therefore, the balance of the principal that! 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