Question

Which descriptions about simple interest and yearly compounded interest are true? Check all that apply. Only compound interest has an exponent in its formula. Simple interest is earned on principal and interest. Compound interest earns more money than simple interest at the same rate for the same amount of time. Simple interest earns more money than compound interest at the same rate for the same amount of time. Simple interest is only earned on the original principal investment. Only compound interest earns the same interest amount every year. Only simple interest uses time in its formula. Compound interest is earned on principal and interest.

Answer 1

Answer:

Only compound interest has an exponent in its formula.

Simple interest is only earned on the original principal investment.

Compound interest is earned on principal and interest.

Step-by-step explanation:

Answer 2

Answer:

• Only compound interest has an exponent in its formula.
• Simple interest is only earned on the original principal investment.
• Compound interest is earned on principal and interest.

Step-by-step explanation:

The above statements are self-explanatory.

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The one statement that can be argued is ...

  "Compound interest earns more money than simple interest at the same rate for the same amount of time."

This is true for time periods longer than the initial compounding interval. If interest is compounded annually, the amount of simple interest and compound interest will be the same for the first year. After that, the compound interest account earns more, because interest is paid on interest and principal, not just principal.