Read the two statements and choose the correct option.
I. Under the flat-rate method, interest is charged on the full loan for the whole term.
II. At the same quoted rate, the flat-rate method costs the borrower less than the reducing-balance method.

Only ICorrect answerYour answerOnly IICorrect answerYour answerBoth I and IICorrect answerYour answerNeither I nor IICorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

I: that is what 'flat' means; repayments do not reduce the sum interest is charged on. True.
II: the reducing-balance method charges interest only on what is still owed, so at the same rate it costs less, not more. False.

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Read the two statements and choose the correct option.I. Under the flat-rate method, interest is charged on the full loan for the whole term.II. At the same quoted rate, the flat-rate method costs the borrower less than the reducing-balance method.