Business Math Q2

Simple interest computation will always be based on the original principal.

• True

• False

Answer explanation

True. Simple interest is calculated using the original principal amount, meaning the interest does not change based on any accumulated interest over time.

Interest is the amount of money invested or borrowed originally.

• True

• False

Answer explanation

The statement is false because interest is the cost of borrowing money or the return on investment, not the original amount invested or borrowed, which is referred to as the principal.

Compound interest yields less amount than simple interest.

• True

• False

Answer explanation

Compound interest accumulates on both the principal and the interest earned, leading to a higher total amount over time compared to simple interest, which only calculates on the principal. Therefore, the statement is false.

If you are an investor, it is better to invest your money in a bank offering compound interest.

• True

• False

Answer explanation

True. Investing in a bank that offers compound interest is advantageous because it allows your money to grow faster over time, as interest is earned on both the initial principal and the accumulated interest.

Debt using credit cards is an example of simple interest.

• True

• False

Answer explanation

The statement is false because credit card debt typically involves compound interest, not simple interest. Interest on credit cards is calculated on the outstanding balance, which can change over time.

What is the formula in computing the simple interest on a given financial transaction?

• Is=Prt

• Is=Pr2t

• Is=rPt

Answer explanation

The formula for simple interest is Is = Prt, where Is is the interest, P is the principal amount, r is the rate of interest, and t is the time period. This formula correctly calculates the interest earned on a financial transaction.

This refers to the amount paid or earned for the use of money.

• Conversion period

• Principal

• Interest

• Rate

Answer explanation

The correct answer is 'Interest' as it refers to the amount paid or earned for the use of money. 'Principal' is the initial amount of money, while 'Rate' and 'Conversion period' relate to how interest is calculated.

Date on which money is received by the borrower.

• Conversion period

• Maturity date

• Origin date

• Repayment date

Answer explanation

The origin date refers to the date on which the borrower receives the funds. This is distinct from the maturity date, which is when the loan is due, and the repayment date, which is when payments are made.

30 months is equivalent to

• 2.5 years

• 2.75 years

• 3 years

• 3.25 years

Answer explanation

To convert months to years, divide the number of months by 12. Thus, 30 months ÷ 12 = 2.5 years. Therefore, the correct answer is 2.5 years.

• 0.0032

• 0.032

• 0.32

• 3.2

Answer explanation

To convert 3\frac{1}{5}% to a decimal, first convert the fraction: 3\frac{1}{5} = 3.2. Then, divide by 100: 3.2 / 100 = 0.032. Thus, 3\frac{1}{5}% is equivalent to 0.032.