Explain the Concept of Interest and Compare It to Rate

question 16

Essay

Explain the concept of interest and compare it to rate of interest.

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Definitions:

Time Value

The principle that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

Par Value

The nominal or face value of a bond, share of stock, or coupon as indicated on a bond or stock certificate.

Fair Value

The cost incurred or received during the sale of an asset or transfer of a liability in a systematic transaction among market actors on the valuation date.