True or false about compounding

Exercise and reference answers

Questions

1. Statement is true

   Yes

   Statement

   Simple interest pays on the principal alone.

2. Statement is true

   Yes

   Statement

   Compound interest is added to the principal.

3. Statement is true

   No

   Statement

   Compounding grows an account more slowly.

4. Statement is true

   Yes

   Statement

   Monthly compounding gives 12 periods a year.

5. Statement is true

   No

   Statement

   Abena gained $48.60 by compounding.

6. Statement is true

   Yes

   Statement

   Compound growth follows a geometric series.

Instructions

Decide whether each statement is true or false.

Explanation