Podcast
Questions and Answers
What distinguishes the 'principal' in a financial context?
What distinguishes the 'principal' in a financial context?
- The financial gain derived from an investment over a specified period.
- The charge applied by a lender to a borrower for the use of assets.
- The preliminary sum of money that is invested or borrowed. (correct)
- The cumulative sum of an investment, including both the initial deposit and accrued interest.
In financial terms, what does 'interest' specifically represent?
In financial terms, what does 'interest' specifically represent?
- The total value of an investment after a certain period, combining the initial capital and any returns.
- The original sum of money that is invested or borrowed in a financial transaction.
- A percentage of the principal that is paid on an investment. (correct)
- Money that is saved.
How is the 'amount' of an investment or loan calculated?
How is the 'amount' of an investment or loan calculated?
- Calculated by dividing the principal by the interest rate.
- By adding the principal and the interest together. (correct)
- Determined by subtracting the total interest from the principal.
- It solely depends on the interest accrued over time.
If you deposit $1000 into a savings account that earns 5% simple interest annually, what is the principal amount?
If you deposit $1000 into a savings account that earns 5% simple interest annually, what is the principal amount?
A person invests $2,000 and earns $100 in interest after one year. What term describes the original $2,000?
A person invests $2,000 and earns $100 in interest after one year. What term describes the original $2,000?
Flashcards
Principal
Principal
The initial sum of money invested or borrowed.
Investment
Investment
Money that is saved with the expectation of future benefit.
Interest
Interest
Money earned on investments or paid on a loan.
Amount
Amount
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Interest Rate
Interest Rate
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Study Notes
- Principle refers to money invested or borrowed.
- Investment is defined as money that is saved.
- Interest is the money earned on investments or money paid on a loan.
- Amount of Investments or Loan: sum of the principle
- Interest Rate: The percentage of the principal that the lender charges the borrower and interest, also the percent of the principal that is paid on an investment.
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