Question

Which of the following statements is TRUE. Multiple Choice Compound interest pays Interest on not only the original amount invested but also on any interest payments previously earned. Compound Interest applies to consumer loans but not to investments Compound interest automatically takes into account the impact inflation will have on the value of an investment O Compound Interest normalizes the expected rate of returns taking into account the level of risk involved.

Answer 1

1. Option A is correct!!.

Compound interest pays interest on principal as well as on accumulated interest.

Option B, Incorrect, as compound interest also applies on investment as well.

Option C, Incorrect, impact of inflation is not considered in compound interest rate.

Option D, Incorrect, compound interest do not take into account risk involved.

2. Option D is correct!!.

As a nation produces more and more of a good, opportunity cost of producing specialised becomes higher overtime. This will lead to a point where opportunity cost of producing specialised goods becomes more than the benefit received from producing specialised goods. Hence specialisation will never be complete. Hence Option D is correct!!

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