ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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interest that’s not calculated on a regular basis
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interest that doubles the principal of an account
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interest gained only on the principal of an account
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interest that’s added to the principal of an account
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Detailed explanation-1: -Compound interest is the interest calculated on the principal and the interest accumulated over the previous period. It is different from simple interest, where interest is not added to the principal while calculating the interest during the next period.
Detailed explanation-2: -What is Compound Interest? Compound interest calculates the total interest payment using a variable principal amount. The interest that is accrued over time is added to the principal amount. For example, the interest for the first year is calculated as a proportion of the initial principal.
Detailed explanation-3: -A compound interest account pays interest on both your initial investment plus any interest previously accrued. This interest-upon-interest appreciation is the “compounding” factor that grows with time. Simple interest accounts, on the other hand, only pay interest on the original principal.
Detailed explanation-4: -Compound interest is when interest is added to the starting amount, or principal, so that the interest that has been added also earns interest. With compound interest, you earn interest on the money you save and on the interest that money earns.
Detailed explanation-5: -Monthly Compound Interest Formula. Interest compounded monthly is calculated 12 times in a year. Compounded Quarterly Formula. Interest compounded quarterly is calculated four times in a year. Daily Compound Interest Formula. Annual Compound Interest Formula. 15-Jul-2021