Question

The calculation of interest on the interest of principal amount is called

• A. simple interest
• B. compound interest
• C. multiple interest
• D. interest quarterly compounded

Answer 1

Answer: (B)

compound interest

Simple interest$=\frac{P\times R\times T}{100}$

Simple interest is calculated by multiplying Principle amount, rate of interest, time (years) and dividing it by $100$

Now taking this interest and adding it to the principle amount gives the total principle amount for calculating compound interest

$\Rightarrow$So interest on interest is compound interest

$CI=P{[1+\frac{R}{100}]}^T-P$ it is the correct answer