Question

Which interest is computed on the sum of an original principal and accrued interest?

• A. Simple interest
• B. Annual interest
• C. Compound interest
• D. Complex interest

Answer 1

The correct option is C Compound interest

$\text{Compound interest}$ is computed on sum of original principal and accrued interest.

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.

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