10 Questions
actual or exact rate of interest on the principal
• Effective rate of interest-
depicts the timing and amount of expenses (negative, downward) and revenues (positive, upward) for engineering projects.
CASH FLOW DIAGRAM
positive cash flow or cash inflow
Receipts-
negative cash flow or cash outflow
Disbursement-
The interest is compounded at the end of each period (month, quarter, year, etc.)
DISCRETE COMPOUNDING PAYMENTS-
assumed that cash payments occur once per year, but compounding is continuous through the year.
CONTINUOUS COMPOUNDING PAYMENTS-
- Certain banks lend money in such a way that they deduct the interest on the money at the time the loan is made.
BANKER’S DISCOUNT
interest deducted
Discount-
actual amount received by the borrower
Proceeds-
amount the borrower is obligated to repay
Maturity value-
This quiz covers the concept of determining the actual or exact rate of interest on the principal amount. Test your knowledge on calculating interest rates accurately.
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