Question

In a loan, the lender lends the borrower ________, for which the borrower pays the lender ________.

		the term; the default
		interest; the term
		the principal; the principal plus interest
		the principal plus interest; the principal

Answer 1

Answer. (c) the principal; the principal plus interest

Explanation: In a loan, a principal amount means the main amount of money that has been given by the lender to the borrower for a decided period of time. When the time gets over, the borrower not only has to return the principal amount of money, but also a charge for using lender's money in that time period. This is the interest .The interest is affected by many factors like the interest earned on savings deposits, or the interests on other better loans, etc. Thus the interest in a loan is the return to an investment.