The earned interest rate which is reinvested in other investment is classified as _________?
Correct answer: A. compound interest
- A. compound interest
- B. investment risk
- C. interest rate
- D. stated rate
Explanation
When earned interest is added to the investment and itself earns further interest, the process is compounding. The resulting return is therefore classified as compound interest rather than a risk or merely a stated rate.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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