Effective rate of interest
Nominal rate of interest
Compound interest
Simple interest
Answer is Right!
Answer is Wrong!
The correct answer is: Simple interest.
Simple interest is interest calculated on the principal amount only, not on any interest that has accrued. It is calculated by multiplying the principal amount by the interest rate and the number of years.
Effective interest rate is the actual rate of interest paid or earned on a loan or investment. It takes into account the effects of compounding, which can increase or decrease the effective rate of interest.
Nominal interest rate is the stated interest rate on a loan or investment. It does not take into account the effects of compounding.
Compound interest
is interest that is calculated on the principal amount plus any interest that has already accrued. This means that the interest you earn in one period is added to the principal amount, and then interest is calculated on the new, larger amount. This can lead to a significant increase in the amount of interest you pay or earn over time.