The Accounting Rate of Return Differs from the Internal Rate

question 116

True/False

The accounting rate of return differs from the internal rate of return and the payback period in that, the accounting rate of return does not focus on cash flows.

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Definitions:

Compounded Quarterly

Interest on an investment or loan is calculated four times a year, with each calculation including the interest from previous periods.

Equal Payments

Consistent payment amounts made regularly over a period, typical in loans and annuities.

Simple Interest

Interest calculated on the principal sum only, not compounding on earned interest, typically over a period of time.

Savings Account

A bank account that earns interest over time, designed for the deposit of funds not intended for immediate use.