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Meaning / Definition of

Total Interest Payments

Categories: Loan and Mortgage, Credit and Debt, Real Estate,

The sum of all interest payments to date or over the life of the loan. This is an incomplete measure of the cost of credit to the borrower because it does not include up-front cash payments, and it is not adjusted for the time value of money. See effective rate.

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Definition / Meaning of

Inflation-protected Security (TIPS)

Categories: Finance,

us treasury inflation-protected securities (TIPS) adust the principal twice a year to reflect inflation or deflation measured by the consumer price index (CPI). The interest rate is fixed and is paid twice a year on the adjusted principal. So if your principal is larger because of inflation you earn more interest. If it's lower because of deflation, you earn less.You can buy TIPS with terms of 5, 10, or 20 year at issue using a TreasuryDirect account or in the secondary market. At maturity you receive either the adjusted principal or par value, whichever is greater. You owe federal income tax on the interest you earn and on inflation adjustments in each year they're added even though you don't receive the increases until the security matures. However, TIPS earnings are exempt from state and local income taxes.These securities provide a safeguard against deflation as well as against inflation since they guarantee that you'll get back no less than par, or face value, at maturity.

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