Question

When the interest you get after every year is different for a given principal sum and rate of interest, it is called-

• A. Complicated Interest
• B. Simple Interest
• C. Compound Interest
• D. Constant Interest

Answer 1

The correct option is C

Compound Interest

In case of compound interest, the principal for every year changes. Actually, the amount at the end of every year (P + SI) is taken as the new principal for the next year. This process is called compounding.

The interest so obtained at the end of certain years is known as the compound interest. Since the principal is different for every year, so is the interest for every year.