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Questions and Answers
What is compound interest?
What is compound interest?
- Interest that remains constant over time
- Interest on principal only
- Interest on previously accumulated interest
- Interest on principal plus interest (correct)
How does compound interest differ from simple interest?
How does compound interest differ from simple interest?
- Compound interest has a higher interest rate than simple interest
- Simple interest is used in finance and economics, while compound interest is not
- Compound interest involves reinvesting interest, while simple interest does not (correct)
- Simple interest involves compounding, while compound interest does not
What is the compounding frequency?
What is the compounding frequency?
- The number of times per year the principal amount is adjusted for inflation
- The total number of periods per year
- The frequency at which simple interest is calculated
- The number of times per year the accumulated interest is paid out or capitalized (correct)
What does monthly capitalization with interest expressed as an annual rate mean?
What does monthly capitalization with interest expressed as an annual rate mean?
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What is the simple annual interest rate also known as?
What is the simple annual interest rate also known as?
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