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Questions and Answers
What is the main difference between simple interest and compound interest?
What is the main difference between simple interest and compound interest?
- Simple interest remains constant throughout the term, while compound interest is computed on the principal and also on the accumulated past interest. (correct)
- Simple interest is earned by the lender, while compound interest is paid by the borrower.
- Simple interest is computed on the principal, while compound interest is a way to earn money using the original money as well as the interest.
- Simple interest is calculated annually, while compound interest is calculated quarterly.
Who is the person (or institution) who invests the money or makes the funds available?
Who is the person (or institution) who invests the money or makes the funds available?
- Lender or creditor (correct)
- Principal
- Borrower or debtor
- Rate(r)
What does 'origin or loan date' refer to?
What does 'origin or loan date' refer to?
- Amount of time in years the money is borrowed or invested
- Date on which money is received by the borrower (correct)
- Annual rate, usually in percent, charged by the lender
- Date on which the money borrowed or loan is to be completely repaid
What does 'maturity value or future value' represent?
What does 'maturity value or future value' represent?
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How is 'time or term (t)' defined in the context of borrowing and investing?
How is 'time or term (t)' defined in the context of borrowing and investing?
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What does 'rate (r)' represent in the context of borrowing and investing?
What does 'rate (r)' represent in the context of borrowing and investing?
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What does 'principal (P)' refer to in borrowing and investing?
What does 'principal (P)' refer to in borrowing and investing?
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