Simple interest is used as the basis for other types of interest. The most common application of simple interest is called an add-on loan. An add-on loan is a loan in which the future value of the loan is calculated and then payments are determined by dividing this by the number of payments to be made. The following example demonstrates this type of loan.

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Time is the number of units of the time for which the money is borrowed and for which the interest is calculated.

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True

False

If a known amount in the past is subject to the time value of money, the maturity value is to be calculated.

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False

The original value and the dated value of a sum of money are always not the same when subject to a rate of interest.

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False

The time value of money is when the value of any sum of money subject to interest changes with time.

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True

False