Question

Jamie earned $14 in interest on her savings account last year. She has decided to leave the $14 in her account so that she can earn interest on the $14 this year. The interest earned on last year’s interest earnings is called:

Answer 1

Answer:

interest on interest.

Explanation:

The interest income which is earned from the last years interest earned is called interest on interest. As Jamie earned $14 interest last year and left the amount to earn further interest on this $14 too. Assuming the Effective interest rate is 10%, then additional $1.4 will also be earned on the interest invested with principal. This $1.4 is known as The interest on interest.