ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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money paid to you by a bank for the money you have in a bank account
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put into a bank account
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to borrow something
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None of the above
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Detailed explanation-1: -Interest on a savings account is the amount of money a bank or financial institution pays a depositor for holding their money with the bank. In a way, a bank borrows money from their depositors by using the deposited funds to lend money to other customers.
Detailed explanation-2: -Compounding interest essentially means “interest on interest.” The interest payments change each period instead of staying fixed. Simple interest is based solely on the principal outstanding, whereas compound interest uses the principal and the previously earned interest.
Detailed explanation-3: -Interest is the price you pay to borrow money or the cost you charge to lend money. Interest is most often reflected as an annual percentage of the amount of a loan. This percentage is known as the interest rate on the loan.
Detailed explanation-4: -The sum of money you deposit into a savings account or borrow from a bank is called the principal. The fee to borrow money is called interest. When you borrow money you pay back the principal and interest to your lender.
Detailed explanation-5: -When you borrow money, interest is the cost of doing so and is typically expressed as an annual percentage of the loan (or amount of credit card borrowing). When you save money it is the rate your bank or building society will pay you to borrow your money. The money you earn on your savings is also called interest.