SIMPLE AND COMPOUND INTEREST

Mastering Interest Concepts Quiz

Test your knowledge of simple and compound interest with this engaging quiz! Perfect for students and anyone looking to enhance their understanding of financial concepts.

Discover key terms and principles, such as:

Banker’s year calculations
Principal and interest definitions
Proportional interest computations

12 Questions3 MinutesCreated by CalculatingWizard42

� is computed on the basis of one banker’s year. 1 banker year = 12 months with 30 days each = 360 days

- the amount of money borrowed and on which interest is charged.

– if the interest to be paid is directly proportional to the length of time the amount or principal is borrowed.

– the amount earned by one unit of principal during a unit of time

� the interest earned by the principal is not paid at the end of each interest period, but is considered as added to the principal and therefore will also earn interest for the succeeding periods.

� is the actual rate of interest on the principal for one year.

– based on the exact number of days, 365 days for an ordinary year and 366 for a leap year.

� specifies the rate of interest and the number of interest periods per year.

� if r is the nominal annual interest and m is the number of interest period each year, then the interest rate per interest period is I = r/m and the number of interest periods in n years is mn. Thus:

� is the discount on one unit of principal per unit of time.

- on a negotiable paper, is the difference between what is worth in the future and its present worth,

– amount of money paid for the use of borrowed capital. It is also the income produced by the money which was lent.

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