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Understanding Interest, Lenders, and Borrowers

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Understanding Interest, Lenders, and Borrowers

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Questions and Answers

What does the borrower have to compensate for when paying interest?

The borrower's profit

The time the borrower was deprived of using the money

The lender's goodwill

The time the lender was deprived of using the money (correct)

Which of the following is NOT one of the factors of simple interest?

Principal (P)

Time (t)

Interest Expense (IE) (correct)

Interest rate (r)

What is the formula to calculate simple interest?

$T = I / pr$

$R = I / pt$

$P = I / rt$

$I = Prt$ (correct)

What does 'Actual time' refer to in interest calculations?

Obtained by counting the actual number of days between two given dates Signup and view all the answers

What is 'Simple Discount'?

Interest collected in advance from the amount of loan Signup and view all the answers

What is a 'Simple Interest Note' used for?

$Drawer & Drawee$ Signup and view all the answers

What is the term used to describe the note in which the loan interest is deducted in advance?

Treasury Bill Signup and view all the answers

How often is interest calculated in the scenario of compounding semiannually?

2x a year Signup and view all the answers

Which term refers to the single payment made at the end of a loan period?

Balloon payment Signup and view all the answers

What does the time value of money allow in finance?

Comparison of cash flows from different periods Signup and view all the answers

In finance, what does the term 'Present value' involve?

Discounting to today’s value Signup and view all the answers

Which term describes the situation where a depositor earns interest on interest based on its compounding period?

Compound interest Signup and view all the answers