10 Chapter Discounted Trust Deed

10 Chapter Discounted Trust Deed - Oct 4, 2011 Chapter 10 -...

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Oct 4, 2011 Chapter 10 - Discounted Notes - Advanced Finance 1
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Oct 4, 2011 Chapter 10 - Discounted Notes - Advanced Finance 2 All Notes Have Value All notes have value. The value is dependent on two factors; 1. The propensity for the payee to pay. 2. The security for the note. 3. The face amount of the note. 4. The interest rate on the note. 5. The term of the note.
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Oct 4, 2011 Chapter 10 - Discounted Notes - Advanced Finance 3 Propensity to Pay The propensity to pay, and to pay on time adds greater value to notes. This reliance on timely payments creates a credit history and leads to the desirability of lending money to that individual or entity. People or companies who pay slowly or erratically are normally charged a greater interest rate. Often slow pay or erratic pay people or companies are completely left out of the credit world.
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Oct 4, 2011 Chapter 10 - Discounted Notes - Advanced Finance 4 Secured or Unsecured Notes, promissory notes, any promise to pay can be secured or unsecured. Secured notes are more desirable. If something were to happen to the payee, there would still be an asset of value to guarantee the loan would be paid off.
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Oct 4, 2011 Chapter 10 - Discounted Notes - Advanced Finance 5 Face Value of The Note Face value is the amount for which the note was written. A $50,000 Trust Deed has a face value of $50,000. The face value of the note has a great deal to do with the value. Under any given circumstances, if the face amount of the loan is greater, and all other factors of value remain the same, the note with the greatest face value will have the greatest value.
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Oct 4, 2011 Chapter 10 - Discounted Notes - Advanced Finance 6 The Interest Rate on The Note The interest rate on a note lends to the value. The greater the interest rate, the greater the value. A $50,000 note for 5 years with a 10% interest rate, is likely worth more than a $50,000 note for 5 years with a 7% interest rate. Generally speaking we can say that if a not has the same face amount, the same term, but a lower interest rate, it will be less valuable than a note with a higher interest rate.
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Oct 4, 2011 Chapter 10 - Discounted Notes - Advanced Finance 7 Interest Rate Terms Affect Value The interest rate on notes can be monthly and amortize the note in a given number of years. For example, in real estate we are used to 30 year notes at a fixed rate, and payable in equal monthly installments. The terms of the interest rate calculation, or how frequently the rate is applied lends value or detracts value from a note.
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Chapter 10 - Discounted Notes - Advanced Finance 8 Interest Rate Continued A 1 st Trust Deed in the amount of $400,000, at 8% interest, amortized for 30 years, and payable in equal monthly payments of $2,935.05 would have a greater purchase value than; A 1 st Trust Deed in the amount of $400,000, at 8% interest, amortized for 30 years, and payable in equal annual installments of $35,530.97.
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10 Chapter Discounted Trust Deed - Oct 4, 2011 Chapter 10 -...

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