Answer: the store violate TILA
Explanation:
The Truth in Lending Act of 1968 refers to the federal law that's designed in order to promote how the consumer credit will be used as there should be disclosures regarding terms and cost.
The Act is vital in protecting the consumers from misleading practices and provides them with necessary information about the costs of credit. Based on the information given, the store violates TILA.
Which of the following describes the tax advantage of a qualified retirement plan
Answer:
Qualified retirement plans give employers a tax break for the contributions they make for their employees. Those plans that allow employees to defer a portion of their salaries into the plan can also reduce employees' present income-tax liability by reducing taxable income.
Provides a way to accumulate substantial retirement income.
Those are some reasons, hope they helped!!
Explanation:
Assume that as their leader, you wanted to influence minimum wage earners in a plastic bottle recycling center to work faster. Which one or two influence tactics are likely to be effective
Answer:
An effective leader is one who is able to influence his team through his communication and interpersonal skills.
In order to achieve greater speed and productivity at work, some influencing tactics that can be effective in a recycling center where workers earn a minimum wage may be associated with the leader's ability to empathize with the team, recognizing the difficulties and challenges of the work, but acting in a comprehensive, ethical way and helping them in their demands, exercising practical leadership, where the leader is the first to set a positive example of what he wants to achieve.
An order for 140 units of Product A has been placed. There are currently 20 units of Product A on hand. Each Product A requires 3 units of Component B. There are 40 units of Component B on hand. What are the net requirements for Component B
Answer:
Order for unit B = 440
Explanation:
Given:
Order for unit A = 140 units
Units A in hand = 20 units
Units B in hand = 40 units
1 unit A required 3 units of B
Find:
Order for unit B
Computation:
Total unit of A = 140 + 20
Total unit of A = 160 units
Total unit B required = 160 x 3
Total unit B required = 480
Order for unit B = Total unit B required - Units B in hand
Order for unit B = 480 - 40
Order for unit B = 440
A contra account will not:_____.
a. be listed immediately after its related account.
b. be potentially classified as a contra-assets or contra-liabilities.
c. always has a normal debit balance.
d. has a normal balance which is the opposite of its related account.
Answer:
a
Explanation:
first one is the best answer
An overall management objective is to:
a. minimize the number of sales transactions
b. minimize the total amount of accounts receivable
c. minimize the time from the beginning of the selling process to the end of cash collections
d. maximize the amount of float
Answer:
c. minimize the time from the beginning of the selling process to the end of cash collections
Explanation:
Management does not aim to minimize sales transactions or total amount of accounts receivable. Neither does it aim, to hold excess cash through cash float. Management aims to minimize the time from the beginning of the selling process to the end of cash collections so as to be liquid and avoid bad debts.
MC Qu. 152 Adams Manufacturing allocates... Adams Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Adams estimated total overhead of $364,800; materials of $418,000 and direct labor of $228,000. During the year Adams incurred $426,000 in materials costs, $415,400 in overhead costs and $232,000 in direct labor costs. Compute the overhead application rate.
Answer:
$1.60 per direct labor hour
Explanation:
Overhead application rate = Budgeted Overheads ÷ Budgeted Activity
hence,
Overhead application rate = $364,800 ÷ $228,000
= $1.60 per direct labor hour
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $350,000 per quarter. The company allocates these costs to the joint products on the basis of their relative sales value at the split-off point. Unit selling prices and total output at the split-off point are as follows:
Product Selling Price Quarterly Output
A $16 per pound 15,000 pounds
B $8 per pound 20,000 pounds
C $25 per gallon 4,000 gallons
Each product can be processed further after the split-off point. Additional processing requires no special facilities. The additional processing costs (per quarter) and unit selling prices after further processing are given below:
Product Additional Processing Costs Selling Price
A $63,000 $20 per pound
B $80,000 $13 per pound
C $36,000 $32 per gallon
Required:
Which product or products should be sold at the split-off point and which product or products should be processed further?
Answer:
The incremental selling price for product 1 is 60,000, product 2 is 100000 and product 3 is 28,000.
Sell at split off for product 1 is Yes and product 2 is No and product 3 is Yes.
Explanation:
Here,
Which is a risk in IS development?
Answer:
Very simply, a risk is a potential problem. It's an activity or event that may compromise the success of a software development project. Risk is the possibility of suffering loss, and total risk exposure to a specific project will account for both the probability and the size of the potential loss.
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Liz received an email from a long-term client informing her that they were planning to work with another advertising agency. Which response is the best application of the some post-event strategies of resilience?
Answer:
Review all email to see if the client was somehow offended. Then analyze listening skills to ensure the client's needs were met. Discuss with a mentor. If the relationship can't be salvaged, learn from the experience and move on.
Explanation:
Due to the fact that Liz received a mail from a long-time client who tells her they were planning on working with another advertising agency, the best response that is the best application of some post-event strategies of resilience are:
1. Reviewing past emails to see if they offend the client in any way
2. Analyse the listening skills to ensure that the client's needs were met
3. Discuss with a mentor
4. Learn from the whole experience
A 30-year maturity bond with face value of $1,000 makes annual coupon payments and has a coupon rate of 8%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places.)
Answer and Explanation:
a. The yield to maturity is
Given that
FV = $1000,
PV = -$900
PMT = 80 (8% of $1,000)
NPER = 30
The formula is
=RATE(NPER,PMT,-PV,FV,TYPE)
after applying the formula, the rate is 8.97%
b. In the case when the bond is sold at par so this means that yield to maturity is equivalent to the coupon rate i.e. 8%
c. The yield to maturity is
Given that
FV = $1000,
PV = -$1100
PMT = 80 (8% of $1,000)
NPER = 30
The formula is
=RATE(NPER,PMT,-PV,FV,TYPE)
after applying the formula, the rate is 7.18%
b) Take a real time example of a company which has formed a strategic alliance then talk about strategic relationships. What is their rate of success? Why do businesses develop strategic partnerships?
Answer:
c
Explanation:
For most goods in an economy, the primary signal that guides the decisions of buyers and sellers is a. quality. b. advertising.
Answer:
There will be more options than 2 of them. Probably it was a brainly error.
For most goods in an economy, the primary signal that guides the decisions of buyers and sellers is price.
A bond has annual coupons, $1000 par value, 2 years to maturity, 8% coupons and a 6% yield. Calculate the Macaulay Duration. The settlement date (purchase date) is 1/1/2030 and maturity date is 1/1/2032.
Give your answer to two decimal place.
Answer:
The answer is "1.93 years".
Explanation:
[tex]Macaula \ \ duration \ \ \ \ \ \ \ \ \ \ 1000 \times 8\%\\\\[/tex]
[tex]years \ \ \ \ cash \ flows \ \ \ \ pv\ of \ 6\%\ \ \ \ present \ value \ \ \ \ current \ value \ \ \ \ pv/current \ value \ \ \ \frac{pv}{cp}\times t[/tex][tex]\$80.00\ \ \ \ \ \ \ 0.9434 \ \ \ \ \ \ \ \$75.472 \ \ \ \ \ \ \ \$1,036.67 \ \ \ \ \ \ \ 0.0728 \ \ \ \ \ \ \ 0.0728\\\\\$ 1,080.00 \ \ \ \ \ \ \ 0.8900 \ \ \ \ \ \ \ \$961.196 \ \ \ \ \ \ \ \$1,036.67 \ \ \ \ \ \ \ 0.9272 \ \ \ \ \ \ \ 1.8544\\\\[/tex]
[tex]\$ 1,036.668 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 1.92772\\\\[/tex]
that's why the Macaula duration is 1.93 years.
describe five ways in which contract management might adds value after the contract award stage of the sourcing process.
Answer:
The five ways for contract management are:
1 - how buyer and supplier work after contract has been awarded.
2 - Key decisions made.
3 - Risk of misunderstanding and disagreement.
4 - Identify opportunities and improve performance.
5 - Performance evaluation against KPIs.
Explanation:
Contract management is essential for any business to succeed. There are five ways in which contract management will add value after contract award stage. Usually value addition is achieved by the response of buyer and seller towards the services after the contract has been awarded. There should be right individuals involved in decision making process. The performance should be evaluated against the KPI mentioned in the contract. If both supplier and buyer work with mutual understanding there is very less chance for disagreement and value will be added to the contract performance.
In 2020, Susan retired from her active participation in a 50% owned restaurant business, which she owned for 20 years. Susan is also a material participant in a clothing store which she has a 50% ownership. Susan continues to actively participate in the clothing store in 2020. The restaurant generated an $80,000 loss, and the clothing store produced $150,000 in income in 2020. These amounts are Susan's share of each activity. Susan does not participate nor own any other business.
Question Completion with Options:
a. Susan cannot deduct the $80,000 loss from the restaurant because she is not a material participant.
b. Susan can offset the $80,000 loss against the $150,000 of income from the retail store.
c. Susan will not be able to deduct any losses from the restaurant until she has been retired for at least three years.
d. Assuming Susan continues to hold the interest in the restaurant, she will always treat the losses as active.
Answer:
Susan
b. Susan can offset the $80,000 loss against the $150,000 of income from the retail store.
Explanation:
Susan can offset the $80,000 loss from the restaurant business against the income from the retail store because she has been an active and material participant in both businesses. For the past 20 years, she had participated materially in the restaurant, only just retiring this year. At least, she has passed the material participant test, number 5.
Financial statements that must be included in the annual report include all of the following except: _____________
a. the statement of cash flows
b. the balance sheet
c. the cash budget
d. the income statement
Answer:
c
Explanation:
Wahlberg Company Income Statement For the Years Ended December 31
2020 2019
Net sales $1,813,600 $1,746,200 Cost of goods sold 1,013,400 990,000 Gross profit 800,200 756,200 Selling and administrative expenses 514,800 474,000 Income from operations 285,400 282,200 Other expenses and losses Interest expense 17,400 14,400 Income before income taxes 268,000 267,800 Income tax expense 78,019 77,600 Net income $ 189,981 $ 190,200
Wahlberg Company Balance Sheets December 31 Assets 2020 2019 Current assets Cash $60,000 $64,700 Debt investments (short-term) 70,200 49,600 Accounts receivable 117,400 101,100 123,700 Inventory 115,500 Total current assets 371,300 330,900 Plant assets (net) 598,900 523,900 $970,200 $854,800 Total assets Liabilities and Stockholders' Equity Plant assets (net) 598,900 523,900 $970,200 Total assets $854,800 Liabilities and Stockholders' Equity Current liabilities Accounts payable $160,800 $144,700 Income taxes payable 43,500 41,800 Total current liabilities 204,300 186,500 Bonds payable 220,000 200,000 424,300 Total liabilities 386,500 Stockholders' equity Common stock ($5 par) 275,600 300,100 Retained earnings 270,300 168,200 Total stockholders' equity 545,900 468,300 Total liabilities and stockholders' equity $970,200 $854,800 All sales were on account. Net cash provided by operating activities for 2020 was $230,000. Capital expenditures were $136,000, and cash dividends were $87,881. nings per share, 6.8 or 6.8%. Use 365 days for calculation.) 3.38 (a) Earnings per share (b) Return on common stockholders' equity 33.31 % (c) Return on assets 20.53 % (d) 1.82 :1 Current ratio 1.21 times (e) Accounts receivable turnover (f) 16.6 days Average collection period (g) Inventory turnover 15.16 times (h) 16.4 days Days in inventory 1.87 times (i) Times interest earned times (j) Asset turnover (k) Debt to assets ratio 22.32 % (l) Free cash flow
Answer:
Answer:
Wahlberg Company
(a) Earnings per share = $3.45 ($189,981/55,120) $3.17 ($190,200/60,020)
(b) Return on common stockholders' equity = 34.80% 40.61%
($189,981/$545,900) ($190,200/$468,300)
(c) Return on assets = 19.58% 22.25%
($189,951/$970,200) ($190,200/$854,800)
(d) Current ratio = 1.82 times 1.77 times
= Total current assets 371,300/ 330,900/
/Total current liabilities 204,300 186,500
(e) Accounts receivable turnover = 16.60 times
(f) Average collection period = 22 days
(g) Inventory turnover = 8.47 times
(h) Days in inventory = 43.1 days
(i) Times interest earned times = 16.4 times 19.6 times
(j) Asset turnover = 1.99x
(k) Debt to assets ratio = 43.37% 45.22%
(l) Free cash flow
= $94,000
Explanation:
a) Data and Calculations:
Wahlberg Company
Income Statement
For the Years Ended December 31
2020 2019
Net sales $1,813,600 $1,746,200
Cost of goods sold 1,013,400 990,000
Gross profit 800,200 756,200
Selling and administrative expenses 514,800 474,000
Income from operations 285,400 282,200
Other expenses and losses
Interest expense 17,400 14,400
Income before income taxes 268,000 267,800
Income tax expense 78,019 77,600
Net income $ 189,981 $ 190,200
Wahlberg Company
Balance Sheets December 31
Assets 2020 2019
Current assets
Cash $60,000 $64,700
Debt investments (short-term) 70,200 49,600
Accounts receivable 117,400 101,100
Inventory 123,700 115,500
Total current assets 371,300 330,900
Plant assets (net) 598,900 523,900
Total assets $970,200 $854,800
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $160,800 $144,700
Income taxes payable 43,500 41,800
Total current liabilities 204,300 186,500
Bonds payable 220,000 200,000
Total liabilities 424,300 386,500
Stockholders' equity
Common stock ($5 par) 275,600 300,100
Retained earnings 270,300 168,200
Total stockholders' equity 545,900 468,300
Total liabilities and
stockholders' equity $970,200 $854,800
Net cash provided by operating activities for 2020 was $230,000.
Capital expenditures were $136,000
Cash dividends were $87,881.
Earnings per share, 6.8 or 6.8%
Outstanding shares =55,120 ($275,600/$5) 60,020 ($300,100 /$5)
Average Receivable = $109,250 ($117,400 + $101,100)/2
Average inventory = $119,600 ($123,700 + $115,500)/2
Average assets = $912,500 ($970,200 + $854,800)/2
(a) Earnings per share = $3.45 ($189,981/55,120) $3.17 ($190,200/60,020)
(b) Return on common stockholders' equity = 34.80% 40.61%
($189,981/$545,900) ($190,200/$468,300)
(c) Return on assets = 19.58% 22.25%
($189,951/$970,200) ($190,200/$854,800)
(d) Current ratio = 1.82 times 1.77 times
= Total current assets 371,300/ 330,900/
/Total current liabilities 204,300 186,500
(e) Accounts receivable turnover = $1,813,600/$109,250 = 16.60 times
= Net Sales/Average Receivable
(f) Average collection period = $109,250/$1,813,600 * 365 = 22 days
(g) Inventory turnover = $1,013,400/$119,600 = 8.47 times
(h) Days in inventory = $119,600/$1,013,400 * 365 = 43.1 days
(i) Times interest earned times = EBIT/Interest Expense
= 16.4 times ($285,400/$17,400) 19.6 times ($282,200/$14,400)
(j) Asset turnover = Sales/Average Assets = $1,813,600/$912,500 = 1.99x
(k) Debt to assets ratio = 43.37% 45.22%
($424,300/$970,200) ($386,500/$854,800)
(l) Free cash flow = Net cash provided by operating activities - Capital expenditures
= $230,000 - $136,000
= $94,000
To decrease the money supply, the Federal Reserve could a. decrease the required reserve ratio. b. conduct an open market purchase of U.S. Treasury securities. c. increase the discount rate. d. forbid the reselling of U.S. Treasury securities.
Answer: c. increase the discount rate.
Explanation:
The discount rate of a country is the rate at which the central bank in that country loans money out to the financial institutions.
When this rate is low, more financial institutions will borrow money as opposed to when it is high. Banks borrowing money increases the money supply in the economy so if the Federal Reserve wants to reduce money supply, it should increase the discount rate which would dissuade banks from borrowing from the Fed thereby limiting money supply.
Gary is walking through his organization's buying process and has identified some additional steps that are needed in a B2B transaction. What would be included in those additional steps
Answer: order-routine specification
problem recognition
Explanation:
Business-to-business transactions occur when a business makes a transaction with another business. It should be noted that this takes place when the business is sourcing materials which will be used for their production process.
Since Gary is walking through his organization's buying process and has identified some additional steps that are needed in a B2B transaction, the additional steps should include the order-routine specification and the problem recognition.
Sheffield Corp. has the following transactions related to notes receivable during the last 2 months of 2020. The company does not make entries to accrue interest except at December 31.
Nov. 1 Loaned $62,400 cash to C. Bohr on a 12-month, 7% note.
Dec. 11 Sold goods to K. R. Pine, Inc., receiving a $1,800, 90-day, 7% note.
Dec. 16 Received a $9,600, 180-day, 8% note to settle an open account from A. Murdock.
Dec. 31 Accrued interest revenue on all notes receivable.
Required:
Journalize the transactions for Sheffield Corp.
Answer and Explanation:
The journal entries are shown below;
On Nov 1
Notes receivable-C.Bohr $62,400
To Cash $62,400
(Being cash paid is recorded)
On Dec 11
Notes receivable-K.R.Pine $1,800
To Sales revenue $1,800
(being sales revenue is recorded)
On Dec 16
Notes receivable-A.Murdock $9,600
To Account receivable $9,600
(Being note receivable is recorded)
On Dec 31
Interest receivable $767
To Interest revenue $767
(Being the interest revenue is recorded)
($62,400 × 7% × 2 ÷ 12 + $1,800 × 7% × 20 ÷ 360 + $9,600 × 8% × 15 ÷ 360)
Sassy, Inc. needs $115 million to build a new distribution center. If it issues common stock to raise the funds, the issuance costs will be 8 percent of the total amount issued. If Sassy can issue stock at $40 per share, how many shares of common stock must be issued so that it has $115 million after flotation costs to use to fund the construction of the distribution center
Answer: 3,125,000 shares.
Explanation:
The number of shares of common stock that must be issued will be calculated as follows:
Let the amount to be raised be represented by x. Therefore,
x - (8% × x) = $115 million
x - (0.08 × x) = $115 million
x - 0.08x = $115 million
0.92x = $115 million
x = $115 million/0.92
x = $125 million
Then the number of shares that'll be issued will be:
= Amount raised / Issue price of stock.
= $125 million / 40
= 3,125,000 shares.
When the pressure for local responsiveness is strong and the pressure for coordination is weak for multinational corporations in an industry, the industry will tend to become:___________
A) global
B) consolidated
C) multidomestic
D) risky
E) indigenous
Garcia Corporation purchased a truck by issuing an $80,000, 4-year, zero-interest-bearing note to Equinox Inc. The market rate of interest for obligations of this nature is 10%. Prepare the journal entry to record the purchase of this truck
Answer: See explanation
Explanation:
The journal entry to record the purchase of the truck will be:
Dr Trucks $54641
Dr Discount on Notes Payable $25359
Cr Notes Payable $80000
Note:
Face value of Note = $80000
× PV factor = 1/1.10⁴ = 0.68301
Present value of Face value of Note = $54641
Seating Galore sells high-end desk chairs. The variable expense per chair is $85.05 and the chairs sell for $189.00 each. The variable expense ratio for Seating Galore's chairs is
Answer:
Variable expense ratio= 0.45
Explanation:
Giving the following information:
The variable expense per chair is $85.05 and the chairs sell for $189.00 each.
To calculate the variable expense ratio, we need to use the following formula:
Variable expense ratio= variable cost per unit / selling price
Variable expense ratio= 85.05 / 189
Variable expense ratio= 0.45
Using the information provided extract the necessary information and compute the Quick Ratio.
Current Assets $50, 000
Current Asset $25, 000
Inventory $ 5,000
Accounts Receivable $ 7,000
Notes Payable $8,000
Answer:
right option is d
account receivable $ 7, 000
Explanation:
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E6-9 Littleton Books has the following transactions during May May 2 Purchases books on account from Readers Wholesale for $3,300, terms 1/10, n/30. May 3 Pays cash for freight costs of $200 on books purchased from Readers. May 5 Returns books with a cost of $400 to Readers because part of the order is incorrect. May 10 Pays the full amount due to Readers. May 30 Sells all books purchased on May 2 (less those returned on May 5) for $4,000 on account. Required 1. Record the transactions of Littleton Books, assuming the company uses a perpetual inventory system. 2. Assume that payment to Readers is made on May 24 instead of May 10. Record this payment.
Answer:
Littleton Books
Journal Entries:
May 2 Debit Inventory $3,300
Credit Accounts Payable (Readers Wholesale) $3,300
To record the purchase of books on account, terms 1/10, n/30.
May 3 Debit Freight-in $200
Credit Cash $200
To record the freight paid for the books of May 2.
May 5 Debit Accounts Payable (Readers Wholesale) $400
Credit Inventory $400
To record the return of some books.
May 10 Debit Accounts Payable (Readers Wholesale) $2,900
Credit Cash $2,871
Credit Cash Discounts $29
To record the full settlement on account, including discounts.
May 30 Debit Accounts Receivable $4,000
Credit Sales Revenue $4,000
To record the sale of books on account.
Debit Cost of goods sold $2,900
Credit Inventory $2,900
To record the cost of books sold.
May 24 Debit Accounts Payable (Readers Wholesale) $2,900
Credit Cash $2,900
To record the full settlement on account.
Explanation:
a) Data and Analysis:
May 2 Inventory $3,300 Accounts Payable (Readers Wholesale) $3,300
terms 1/10, n/30.
May 3 Freight-in $200 Cash $200
May 5 Accounts Payable (Readers Wholesale) $400 Inventory $400
May 10 Accounts Payable (Readers Wholesale) $2,900 Cash $2,871 Cash Discounts $29
May 30 Accounts Receivable $4,000 Sales Revenue $4,000
Cost of goods sold $2,900 Inventory $2,900
May 24 Accounts Payable (Readers Wholesale) $2,900 Cash $2,900
A company that sells multiple types of products has a selling price per composite unit of $150, variable cost per composite unit of $50 and total fixed costs of $25,000. The contribution margin per composite unit is $ .
Answer:
See below
Explanation:
With regards to the above information, the contribution margin is computed as seen below.
Contribution margin per composite unit = Selling price per composite unit - Variable cost per composite unit
= $150 - $50
= $100
Hence, the contribution margin per composite unit is $100
Identify the following costs as a prime cost (P), conversion cost (C), or both (B) for a magazine publisher: a. Paper used for the magazine b. Wages of printing machine employees c. Glue used to bind magazine d. Maintenance on printing machines
Answer:
a. Paper used for the magazine = prime cost (P)
b. Wages of printing machine employees = both (B
c. Glue used to bind magazine = prime cost (P)
d. Maintenance on printing machines = conversion cost (C)
Explanation:
prime cost (P), conversion cost (C), or both (B) are cost of a manufacturing business.
Assume you set up a sole proprietorship and your lawyer tells you that as the owner, you could stand to lose your personal wealth if the business goes bankrupt. This means a sole proprietorship:
Answer:
Faces unlimited liability
Explanation:
From the question we are informed about instance, whereby you set up a sole proprietorship and your lawyer tells you that as the owner, you could stand to lose your personal wealth if the business goes bankrupt. In this case, it means a sole proprietorship Faces unlimited liability. Unlimited liability can be regarded as full legal responsibility that is been assumed for all business debts by business owners as well as partners . This liability cannot be regarded as capped, here there could be paying of obligations through the seizure as well as well as sale of personal assets of the owners, and this quit not the same as that of limited liability business structure.
Frans paid R9600 as interest on a loan he took 5 years ago at 16% rate. What's was the amount he took as loan?
[tex]\bold{{Answer}}[/tex]
Any choices?
The amount he took as loan was Rs.7680
What is loan?The term loan refers to a type of credit vehicle in which a sum of money is lent to another party in exchange for future repayment of the value or principal amount. In many cases, the lender also adds interest and/or finance charges to the principal value which the borrower must repay in addition to the principal balance. Loans may be for a specific, one-time amount, or they may be available as an open-ended line of credit up to a specified limit. Loans come in many different forms including secured, unsecured, commercial, and personal loans.
A loan is a form of debt incurred by an individual or other entity. The lender—usually a corporation, financial institution, or government—advances a sum of money to the borrower. In return, the borrower agrees to a certain set of terms including any finance charges, interest, repayment date, and other conditions. In some cases, the lender may require collateral to secure the loan and ensure repayment.
What are methods of calculating interest on loan?"The interest rate on loans can be set at simple or compound interest. Simple interest is interest on the principal loan. Banks almost never charge borrowers simple interest. For example, let's say an individual takes out a $300,000 mortgage from the bank, and the loan agreement stipulates that the interest rate on the loan is 15% annually. As a result, the borrower will have to pay the bank a total of $345,000 or $300,000 x 1.15. Compound interest is interest on interest and means more money in interest has to be paid by the borrower. The interest is not only applied to the principal but also the accumulated interest of previous periods. The bank assumes that at the end of the first year, the borrower owes it the principal plus interest for that year. At the end of the second year, the borrower owes it the principal and the interest for the first year plus the interest on interest for the first year."
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