Comparing Simple and Compound Interest Concepts

What type of interest allows earnings on the initial principal and the accumulated interest?

• Variable interest

• Simple interest

• Compound interest

• Fixed interest

In the context of loans, which type of interest is preferable for lower overall payments?

• Simple interest

• Compound interest

• Decreasing interest

• Balloon interest

How does compound interest differ from simple interest in terms of interest calculation?

• No difference

• On the principal and accumulated interest

• Only on the accumulated interest

• Only on the principal

How does the principal amount change in compound interest calculations over time?

• Increases

• Decreases

• Fluctuates

• Stays the same

What is the formula for simple interest?

• I = PRT

• I = P/R + T

• I = P + RT

• I = P(1 + RT)

Which interest type typically results in higher returns over a long period?

• Indexed interest

• Compound interest

• Simple interest

• Standard interest

What effect does a higher interest rate have on the growth of an investment?

• Decreases growth

• No effect

• Increases growth

• Variable effect

If the interest rate and time period are the same, which interest type provides more benefits?

• Simple interest

• Compound interest

• Depends on the principal

• Both are the same

What is the impact of time on the growth of compound interest?

• No impact

• Decreasing growth

• Linear growth

• Exponential growth

What is the primary advantage of compound interest?

• Lower initial payments

• Interest on interest

• Consistent interest rate

• Fixed payment schedule