Question

_________ is interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.

• A. Simple Interest
• B. Net Amount
• C. Principle
• D. Compound Interest

Answer 1

The correct option is D Compound Interest

$\text{Compound interest}$ is interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.

Conversely, compound interest accrues on the principal amount and the accumulated interest of previous periods; it includes interest on interest, in other words.

It is calculated by multiplying the principal amount by the annual interest rate raised to the number of compound periods, and then minus the reduction in the principal for that year.

$\Rightarrow$ $C.I.=P{(1+\frac{R}{100})}^T-P$