Question

What will you call the extra amount of money you got as profit, after investing a certain amount ?
(A) \[{\text{Interest}}\]
(B) \[{\text{Principle}}\]
(C) \[{\text{Amount}}\]
(D) \[{\text{Rate}}\]

Answer 1

Hint: Here we are going to use the concept of amount, principle, interest, rate and time. In this question there is a huge need for concepts of interest that you need to know.

Complete step by step answer:
When you invest some money or lend some money, you get back the amount that you have invested along with some profit too. And the profit is calculated in several ways based on the type of method that you select to invest i.e. that may be simple method or compound method.
And this profit is called “Interest” . The interest also depended on the time period and also on the rate of interest.
The amount that you invest initially is called the “Principal amount”.
The total amount that you get at the end is called the “Amount” which is the sum of Principal amount and the interest.
If is the principle amount, is the time period, is the rate of interest and is the total number of years, then,
Simple interest \[ = \dfrac{{PTR}}{{100}}\] ; So we get the final amount as \[A = P + \dfrac{{PTR}}{{100}}\] .
And in the compound method, we get the final amount as \[A = P{\left( {1 + \dfrac{R}{N}} \right)^{NT}}\] .

So, the correct answer is “Option A”.

Note:
The compound interest can be calculated annually or half-yearly or quarterly also. To get the interest amount, you can also apply the logic that the final amount is the sum of principal amount and the interest. So the interest amount is \[I = A - P\] . And make a note that the time period is generally in years. In the compound method, it will be decreased and the “N” value gets increased.