A Loan Consists of What Elements

question 32

Multiple Choice

A loan consists of what elements?

• A) Principal.
• B) Interest.
• C) Loan fees.
• D) All of these answer choices are correct.

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Definitions:

Compounded Annually

Interest on an investment or loan calculated once a year, where each year's interest is added to the principal.

Future Value

The estimated value of an investment at a future date, taking into account variables like interest rates or compound interest, used in financial planning and assessment.

Interest Rate

The fraction of a loan amount that is applied as interest for the borrower, commonly indicated as an annual percentage of the remaining loan balance.

Compounded Annually

Interest calculation method where interest is added to the principal at the end of each year, and future interest calculations include this additional amount.