The method of calculating interest once during the entire life of the loan, on the original sum borrowed, is known as:

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The question asks about a method of calculating interest that involves applying interest only to the original principal for the entire loan term, without compounding.
Option 1: 'rule of 72.' This is a quick heuristic used to estimate how long it takes for an investment to double at a given interest rate, not a method of calculating interest on a loan. It does not describe how interest is computed.
Option 2: 'compounding.' Compounding means interest is calculated on the accumulated amount, including previously earned interest. This is the opposite of simple interest, where interest is not earned on interest.
Option 3: 'interest on interest.' This phrase describes the effect of compounding, where interest earns interest in future periods. It is not the method described in the question.
Option 4: 'simple interest.' This is the method where interest is computed only on the original principal for the entire life of the loan, with no accumulation of interest on previously earned interest. This directly matches the description given in the question.

BFIN011 Week 4 Online Assessable Quiz - 45 minutes |LA001

The method of calculating interest once during the entire life of the loan, on the original sum borrowed, is known as:

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