Interest Rates &
Amortization Practice
Exam 2026/2027
VERSION WITH
QUESTIONS AND
VERIFIED ANSWERS
100% CORRECT WITH
RATIONALES AND PDF
DOWNLOAD.
,1. What is the definition of interest in a
loan?
A. Principal repayment
B. Cost of borrowing money
C. Tax deduction
D. Loan fee only
Answer: B
Interest is the cost paid by a borrower to
use borrowed funds over time.
2. What does APR stand for?
A. Annual Payment Rate
B. Applied Percentage Ratio
C. Annual Percentage Rate
D. Adjusted Principal Rate
,Answer: C
APR reflects the total yearly cost of
borrowing including interest and fees.
3. Simple interest is calculated using
which formula?
A. P × R × T
B. P ÷ R × T
C. P + R + T
D. P × T ÷ R
Answer: A
Simple interest equals principal times
rate times time.
, 4. Compound interest differs from
simple interest because it:
A. Excludes principal
B. Includes interest on interest
C. Is fixed only
D. Is tax free
Answer: B
Compound interest is calculated on both
principal and accumulated interest.
5. What is the principal in a loan?
A. Interest paid
B. Original borrowed amount
C. Late fee
D. Insurance cost
Amortization Practice
Exam 2026/2027
VERSION WITH
QUESTIONS AND
VERIFIED ANSWERS
100% CORRECT WITH
RATIONALES AND PDF
DOWNLOAD.
,1. What is the definition of interest in a
loan?
A. Principal repayment
B. Cost of borrowing money
C. Tax deduction
D. Loan fee only
Answer: B
Interest is the cost paid by a borrower to
use borrowed funds over time.
2. What does APR stand for?
A. Annual Payment Rate
B. Applied Percentage Ratio
C. Annual Percentage Rate
D. Adjusted Principal Rate
,Answer: C
APR reflects the total yearly cost of
borrowing including interest and fees.
3. Simple interest is calculated using
which formula?
A. P × R × T
B. P ÷ R × T
C. P + R + T
D. P × T ÷ R
Answer: A
Simple interest equals principal times
rate times time.
, 4. Compound interest differs from
simple interest because it:
A. Excludes principal
B. Includes interest on interest
C. Is fixed only
D. Is tax free
Answer: B
Compound interest is calculated on both
principal and accumulated interest.
5. What is the principal in a loan?
A. Interest paid
B. Original borrowed amount
C. Late fee
D. Insurance cost
