Interest Payments Quiz

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Questions and Answers

What is the definition of interest in finance and economics?

Payment from a borrower to a lender of an amount equal to the principal sum borrowed
Payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum at a particular rate (correct)
Payment from a borrower to a third party for facilitating the loan transaction
Payment from a lender to a borrower of an amount above repayment of the principal sum at a particular rate

How does interest differ from dividend?

Interest is paid by a company to its shareholders from its profit or reserve, while dividend is paid by a borrower to a lender at a particular rate
Interest is paid by a lender to a borrower at a particular rate, while dividend is paid by a company to its shareholders from its profit or reserve
Interest is paid by a borrower to a lender at a particular rate, while dividend is paid by a company to its shareholders from its profit or reserve (correct)
Interest is paid by a borrower to a lender at a fixed amount, while dividend is paid by a company to its shareholders at a variable rate

In the context of savings, who is the lender?

The bank
The customer (correct)
The borrower
A third party

How is the rate of interest calculated?

<p>Interest amount paid or received over a particular period divided by the principal sum borrowed or lent, usually expressed as a percentage (D)</p> Signup and view all the answers

How does interest differ from profit?

<p>Interest is received by a lender, whereas profit is received by the owner of an asset, investment, or enterprise (D)</p> Signup and view all the answers