The interest rate which is not reinvested but is earned is classified as _____________?
Correct answer: B. simple interest
- A. invested interest
- B. simple interest
- C. earned interest
- D. unstated interest
Explanation
Simple interest is calculated only on the original principal, so the interest earned is not added back for further interest. Reinvesting interest would produce compound interest instead.
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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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