Compounding in practice

Exercise and reference answers

Questions

1. Question

   Under compounding, year two's interest compared with year one's is

   Choices

   1. larger
   2. the same
   3. smaller

   Correct choice

   larger

2. Question

   Under simple interest, year two's compared with year one's is

   Choices

   1. larger
   2. the same
   3. smaller

   Correct choice

   the same

3. Question

   The base for year three under compounding is

   Choices

   1. the original principal
   2. year two's interest
   3. the amount after year two

   Correct choice

   the amount after year two

4. Question

   A passbook where interest rises each year shows

   Choices

   1. compound interest
   2. simple interest
   3. no interest

   Correct choice

   compound interest

Explanation