Question

Select the correct answer. Which statement best defines the term principal? A. It is an arrangement in which you buy now and pay later. B. It is the annual rate of interest a bank charges for a loan. C. It is the original amount of money the bank loans the borrower.

Answer 1

Answer:

The correct answer is C.  It is the original amount of money the bank loans the borrower.

Step-by-step explanation:

Let's recall that are five basic elements for calculating the payment of a loan:

1. The principal. How much money you borrow.

2. The interest rate. How much money you will pay in addition to the principal.

3. The period of time. How long will it takes you to pay the loan.

4. The frequency of payment. Will you pay every month?, every quarter?, every year or maybe every two weeks?

5. Additional payments. When you have additional income seasonally and you want to lower either the period of time or the interests to pay.