1. Which of the following reasons best describes why a seller adds a finance charge to the cash price when calculating the installment price?
(a) A. To penalize the customer for not paying cash. (b) To cover the extra cost of doing business on the instalment plan. (c) To offset the interest paid to the customer. (d) To cover the higher prices charged by the seller’s suppliers for dealing with instalment plans
2. Choose the correct answer: Which of the following best describes how compound interest works?
(a) Interest is calculated only on previously earned interest (b) The compound interest rate increases as the term progresses (c) Interest is calculated only at the end of the term (d) The compound interest rate increases as the term progresses.