BUSINESS ADMINISTRATION
BUSINESS MATHEMATICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Multiplying the principal by the interest for one year.
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Multiplying the interest for one year by the principal
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Dividing the interest for one year by the principal.
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Dividing the principal by the interest for one year.
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Detailed explanation-1: -Interest can be calculated in two ways: simple interest or compound interest. Simple interest is calculated on the principal, or original, amount of a loan. Compound interest is calculated on the principal amount and the accumulated interest of previous periods, and thus can be regarded as “interest on interest.”
Detailed explanation-2: -Using the interest rate formula, we get the interest rate, which is the percentage of the principal amount, charged by the lender or bank to the borrower for the use of its assets or money for a specific time period. The interest rate formula is Interest Rate = (Simple Interest × 100)/(Principal × Time).
Detailed explanation-3: -Compound interest is the interest calculated on the principal and the interest accumulated over the previous period.
Detailed explanation-4: -It is calculated by multiplying the principal amount by one plus the annual interest rate raised to the number of compound periods, and then minus the reduction in the principal for that year.