Question

Question 1 In the process of compounding, we move from present to future In the process of discounting, we move from future to present Question 2 In the I Select ] case, interest earns interest. In the ISelect) cast, interest doesn't earn interest. [ Select ] simple rate of interest compound rate of interest Question3 There are 12 months in one year, 4 weeks in one month, so 1 year-48 weeks. True False

Answer 1

NOTE: As 2 out of the 3 questions posted are already answered (correctly), the solution is only for question 2.

The major point of difference between simple and compound interest is that in the former, interest does not earn interest whereas in the latter interest earns interest. In compound interest, the amount outstanding for a particular period increases by the amount of the interest earned during the previous period which is actually interest earning interest. In simple interest, the amount outstanding for a particular period is equal to the original amount outstanding, with interest-earning no interest.