Q2 L3: interest (INCLUDED)

Question 1

is earned or incurred for the use of the principal amount over the relevant time period.

Answer 1

interest

Question 2

If the interest earned or incurred is always based on the original principal

Answer 2

simple interest

Question 3

The usual assumption in most business transactions is to use the?

Answer 3

compound interest

Question 4

is simply earning interest on interest.

Answer 4

compound interest

Question 5

This means that the basis for the computation of the applicable interest for a certain period is not only the original principal but also any interest earned in the previous period assuming all cash flows would be paid or received in lump sum upon maturity.

Answer 5

compound interest

Question 6

Interest, in this example, is increasing per period because the principal is also increasing by the amount of interest earned in the previous year. Under this assumption, the interest for every year is no longer the same but is higher as it nears maturity.

Answer 6

compound interest

Question 7

Interest in this example, is always calculated based on the original principal. Under this assumption, the interest for every one year is the same.

Answer 7

simple interest

Question 8

cumulative interest + principal =

Answer 8

total of simple interest

Question 9

interest + principal =

Answer 9

total of compound interest

Question 10

the time is always equal to?

Answer 10

1

Question 11

The most basic finance-related formula is the computation of Interest. It is computed as? (what is the formula foe interest)

Answer 11

I = P x R x T

Where:
I = Interest
P = Principal (beginning balance)
R = Interest rate
T= Time