When the simple interest method is used to determine finance charges, the interest is calculated based on the:
A) future value of the installments.
B) average outstanding balance.
C) actual balance of the loan.
D) present value of all finance charges.
E) future value of all finance charges.

Question

Quizplus · Accepted Answer

The simple interest method calculates interest based on the actual balance of the loan, applying the interest rate to the principal amount borrowed.

When the Simple Interest Method Is Used to Determine Finance