BANKING GENERAL KNOWLEDGE
Question
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The principal, divided by interest earned


The principal, plus interest


The principal, minus interest


The principal amount

Detailed explanation1: Simple interest is calculated by multiplying loan principal by the interest rate and then by the term of a loan. Simple interest can provide borrowers with a basic idea of a borrowing cost. Auto loans and shortterm personal loans are usually simple interest loans.
Detailed explanation2: 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 explanation3: What is Simple Interest, A = P (1+rt) The rate at which you borrow or lend money is called the simple interest. If a borrower takes money from a lender, an extra amount of money is paid back to the lender. The borrowed money which is given for a specific period is called the principal.