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Q: When interest is added to the principal and interest is again calculated on the new balance the process is known as compound interest?
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How The Interest Rate On Business Loan Is Calculated?

Interest rate on business loanis calculated on a decreasing balance technique: the principal gets decreased following every repayment term and the interest is calculated on the outstanding principal at the end of the term.

What is the similarity between simple interest and compound interest?

Simple interest is calculated on the principal only. If you have $1,000 and earn 5% interest per year, you will receive $50 at the end of year one. At the end of year two, you will receive another $50. And on it goes. With compound interest, you earn interest on the principal plus any interest you previously earned. Looking again at the previous example, at the end of year one you will still receive $50. At the end of year two, however, you will receive $52.50. Why? Because the 5% is paid on the principal PLUS the interest you previously earned. At the end of 10 years, you'll receive $77.57. After 20 years, $126.35. With simple interest you would still receive only $50.

HOW TO FIND compound interest?

So you use the formula balance=principal(1+n over the number of years the the exponent ;0

How does penalty interest calculated?

Penalty interest is calculated from the required and projected balance

The action of adding accrued interest to the principal balance is called?

capitalization. Capitalization is when all unpaid interest is added to the principal balance of your loan. Capitalization increases your total amount to be repaid because you will then have to pay interest on the increased principal amount.

If a simple interest of 4.5 percent was paid at the end of the year then find the balance at the end of the year?

The formula for simple interest is Interest = Principal x Rate x Time ÷ 100 As the rate is an annual rate and the period is 1 year then Interest = Principal x 4.5/100. The balance at the year end = Principal + Interest = Principal x 104.5/100.

What is the principal balance if the principal plus interest at the end of 1 and a half years is 3360 at an annual interest rate of 8 percent?


What is the Formula for daily compound interest?

The formula for the daily compound interest is B=p(1+r over n)NT as an exponent for the nt B= ending balance P= principal amound r= interest rate n= number of compounds per year t= time( in years)

Are Simple interest calculated as a percentage of the bank balance and interest earned?

This answer is False!!

What is interest expense on balance sheet?

When you pay back a loan or mortgage, part of each payment is interest, the rest is principal. For the interest part you would have Interest Expense, for the principal part something like Mortgage Expense.

When the interest paid on a savings account is added to the balance so the interest earns interest this is known as?

Compound interest

How is the interest rate calculated bank in Indonesia?

The interest rate is calculated on daily balance with regressive tier. The higher the balance, the more interest the customer earns. Also, fund transfer is allowed in this type of an account.