Which of the following is true of interest?

(1 point)
Responses

It is calculated only once, when you first take out the loan.
It is calculated only once, when you first take out the loan.

It is a percentage of the total cost of the loan.
It is a percentage of the total cost of the loan.

It is a percentage of the amount of the principal you have not yet paid back.
It is a percentage of the amount of the principal you have not yet paid back.

It is expressed as the APR of a loan.

1 answer

The most accurate statement regarding interest from the options provided is:

It is a percentage of the amount of the principal you have not yet paid back.

Interest is typically calculated on the remaining principal balance of a loan, which decreases as you make payments. The other statements are either misleading or incorrect. Interest can be calculated multiple times throughout the life of a loan (e.g., monthly, annually), and while it can be expressed as an APR (annual percentage rate), this doesn't encompass the entire picture of how interest accrues on loans.