Question

Which of the following statements best explains compound interest?

Interest based on the principal amount and the interest that accumulates over a
period of time.

Any form of interest earned from saving or investing.

The effect interest has on the total return on an investment over time.

Interest based only on the principal amount of a loan.

Answer 1

Interest based on the principal amount and the interest that accumulates over a

period of time

What is compound interest?

Compound interest is the amount of money paid on a loan.

The amount is computed by adding the interest on the sum of money borrowed by the individual and the interest that has accumulated in time past.

Therefore, Interest based on the principal amount and the interest that accumulates over a period of time.

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