A Borrower Who Only Pays Interest on the Unpaid Balance

question 112

Multiple Choice

A borrower who only pays interest on the unpaid balance of a loan is paying:

• A) simple interest.
• B) compound interest.
• C) discount interest.
• D) high interest.

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Definitions:

Outstanding Common Stock

Shares that are issued by a company and held by investors, excluding any shares held as treasury stock by the company itself.

Annual Amortization

The systematic reduction of the cost (or other basis) of an intangible asset over a specified time period.

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders.

Initial Value Method

A method of accounting in which an investment is initially recorded at its cost without adjusting for changes in the market value over time.