Interest Charges Accrue on Top of Existing Debt and Saving

question 149

Multiple Choice

Interest charges accrue on top of existing debt and saving leads to substantial growth savings over the long run. This is known as the:

• A) vesting effect.
• B) teaser effect.
• C) interest rate effect.
• D) compounding effect.

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Definitions:

Exponential

Pertaining to a mathematical function or growth pattern that increases at a rate proportional to the current value, resulting in rapid growth.

Analytical

Relating to or using analysis or logical reasoning for problem-solving or understanding concepts.

Practical

Concerned with the actual doing or use of something rather than with theory and ideas.

Chronological Age

The actual age of an individual or thing as measured in years from the date of birth.