Term: ACCEPTANCE

Where a bank “accepts” some kind of debt instrument usually at a discount. Debt instruments are basically IOU’s written by one organisation in favour of another. If the company that is owed the money wants to get that money before it is due, they can take the instrument which is proof of that debt to a bank and “discount” it. This means that the bank will pay them out the money now – less a small fee or “discount”. This fee, when expressed as a percentage of the principal amount, can be expressed as an annualised percentage and is known as the Bankers Acceptance rate (the BA rate). The BA rate is an important rate of interest because it reflects the tightness or otherwise of the money supply. When money is tight then the BA rate will rise and vie versa. Interest is the “price” of money.

All information and data contained within the PDSnet Glossary terms is for informational and educational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet glossary terms is based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any glossary term for any reason.« Back to Glossary Index