Which of the following statements is true?

In case of compound interest, the principal is fixed.

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In case of compound interest, the principal changes every year.

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In case of both simple interest and compound interest, the principal is fixed.

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In case of simple interest, the principal changes every year.

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Solution

The correct option is B
In case of compound interest, the principal changes every year.

In case of simple interest the principle does not change yearly while in case of compound interest it does change yearly.

In case of compound interest, the interest is calculated on the amount of the previous year. Thus it is known as interest compounded or compound interest (C.I).

So, in case of compound interest the principal changes every year.

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