PRC-2 · Chapter 2 · Question 32 of 45
When interest is 'compounded', it means interest is calculated on:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The principal plus any previously earned interest.
Explanation
Compounding means you earn 'interest on interest', leading to faster growth of the investment over time.
More Coordinate System and Its Application MCQs
- Q34In financial mathematics, 'Present Value' (PV) refers to:
- Q35What is the effective annual rate (EAR) if the nominal rate is 12% compounded monthly?
- Q36An annuity where the payments are made at the *beginning* of each period is called a/an:
- Q37What happens to the Present Value of a future payment as the discount rate (interest rate) increases?
- Q38How long will it take for a sum to double itself at 10% Simple Interest per annum?