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3 years ago

Why is compound interest preferable to simple interest when investing?

Business

1 answer:

lions [1.4K]3 years ago

3 0

Answer:

O Compound interest pays interest both on the principal and the interest earned in each period.

Explanation:

Compound interest is preferred as it measures the interest on the principal amount and the accrued interest. In the compounding interest, the interest i.e. earned should be added to the principal in order to create the new principal amount. The interest earned at the closing of every year should be more than the last period as the principal amount rises at the starting of the period

Also, the interest earned via the compound interest should be grown much faster as we compared to the fixed rate interest

Therefore the last option is correct

You might be interested in

Last year ABC Media had $425 million of sales, and it had $270 million of fixed assets that were used at 65% of capacity. In mil

FrozenT [24]

Answer:

additional sales without adding the Fixed assets are $228.85 million

so correct option is d) $228.85

Explanation:

given data

sales = $425,000,000

fixed assets = $270,000,000

capacity = 65%

to find out

how much could ABC Media's sales increase before it is required to increase its fixed assets

solution

we get here Sales at full capacity that is express as

Sales at full capacity = Actual sales ÷ capacity % ..................1

put here value

Sales at full capacity = $\frac{425000000}{0.65}$

Sales at full capacity = $653846153.8

so sales without adding fixed assets will be

sales without adding fixed assets = Full capacity sales - Actual sales ............2

put here value

sales without adding fixed assets = $653846153.8 - $425,000,000

sales without adding fixed assets = $228846153.8

so that additional sales without adding the Fixed assets are $228.85 million

so correct option is d) $228.85

7 0

3 years ago

Multiple Product Performance Report Storage Products manufactures two models of DVD storage cases: regular and deluxe. Presented

Pavlova-9 [17]

Answer:

Flexible budget performance report for the July manufacturing activities

Direct Materials : $62,000

Lumber :

Regular ($6.00 × 5,000) $30,000

Deluxe ($9.00 × 2,000) $18,000

Assembly kit :

Regular ($2.00 × 5,000) $10,000

Deluxe ($2.00 × 2,000) $4,000

Labor : $30,000

Regular ($4.00 × 5,000) $20,000

Deluxe ($5.00 × 2,000) $10,000

Variable overhead : $15,000

Regular ($2.00 × 5,000) $10,000

Deluxe ($2.50 × 2,000) $5,000

Fixed manufacturing overhead $13,000

Total $120,000

Explanation:

A Flexed Budget is a Master budget that has been adjusted to reflect the Actual Level of Operation.

8 0

4 years ago

Using the dividend growth model, explain why a firm would be hesitant to reduce the growth rate of its dividends.

Anna007 [38]

Answer:

If a firm decreases its sustainable growth rate (g), the price of their stock will probably decrease. I will use the following example:

P₀ = Div₁ / (Re - g)

Div₁ = $2
Re = 12%
g = 5%

P₀ = $2 / (12% - 5%) = $28.57

if the growth rate g decreases to 2%, and the rest remains unchanged, then

P₀ = $2 / (12% - 2%) = $20

4 0

3 years ago

Santana, Inc. reports the following liabilities (in thousands) on its January 31, 2014, balance sheet and notes to the financial

deff fn [24]

Answer:

$22,577.1

Explanation:

SANTANA INC.Balance Sheet (Partial)January 31, 2014

Current liabilitiesNotes payable $2,563.6

Accounts payable $4,263.9

Current portion of mortgage payable $1992.2

Warranty liability $1,417.3

Unearned rent revenue $1,058.1

Salaries and wages payable $858.1

Income taxes payable $265.2

Total current liabilities $12,418.4

Long-term liabilitiesMortgage payable$6,746.7

Bonds payable $1,961.2

Accrued pension liability$1,115.2

Notes payable $335.6

Total long-term liabilities $10,158.7

Total liabilities $22,577.1

($12,418.4 +$10,158.7)

3 0

3 years ago

Which is not a mandatory subject matter for good-faith bargaining? a. seniority b. insurance c. pension plans d. strike vote e.

maksim [4K]

Answer:

The correct answer is letter "D": strike vote.

Explanation:

Collective Bargaining is the act by which employees organized in labor unions negotiate with employers (mainly managers) about compensations and work conditions. Wages, working hours, merit pay, and vacation length, are common topics of discussion between the two parties.

A strike is the stop of operations of a company because of unattended labor union request. The decision of going on a strike or not relies merely on the union and the strike vote is subject to that group only.

4 0

3 years ago