Question

Compound interest describes increases in value when interest is paid, or compounded, on: ____________ A. Only the original amount invested B. Only the previously paid interest payments C.The original amount invested and previously paid interest payments D. The original amount invested minus any previously paid interest payments

Answer 1

Answer:

C. The original amount invested and previously paid interest payments

Explanation:

Compound interest is the interest calculations that take into account the principal amount and the interest payment summed up to calculate the subsequent interest payment. For example in year 0 there was an investment of 1000 and 10% interest payable annually,

Year 0 = 1000

Year 1 = 1000 + 100 (here hundred is the interest payment)

Year 2 = 1000 + 100 + 110 (110 is the compounded interest on 1000 +100 from previous periods)

Hope that helps.