Which of the following statements is TRUE? A)An investment earning simple interest at rate r always earns less interest compared to the same investment using a compound interest rate of j₁ = r. B)When discounting a promissory note,the larger the simple interest rate used to discount the note,the larger will be the proceeds of the note. C)On a loan,interest calculated using ordinary interest is always less than that calculate using exact interest. D)If a simple discount rate of d is equivalent to a simple interest rate of r,then d

Question

Which of the following statements is TRUE? A)An investment earning simple interest at rate r always earns less interest compared to the same investment using a compound interest rate of j₁ = r. B)When discounting a promissory note,the larger the simple interest rate used to discount the note,the larger will be the proceeds of the note. C)On a loan,interest calculated using ordinary interest is always less than that calculate using exact interest. D)If a simple discount rate of d is equivalent to a simple interest rate of r,then d < r as long as time t is positive.

Quizplus · Accepted Answer

This statement is true because the simple discount rate (d) is always greater than the simple interest rate (r) when time (t) is positive. This is because the simple discount rate discounts the entire amount of the loan upfront, while the simple interest rate only calculates interest on the original principal amount. Therefore, the discount rate must be higher to discount the entire loan amount upfront.

Which of the Following Statements Is TRUE