Question

Why is compound interest preferable to simple interest when investing?

Answer 1

Answer:

O Compound interest pays interest both on the principal and the interest earned in each period.

Explanation:

Compound interest is preferred as it measures the interest on the principal amount and the accrued interest. In the compounding interest, the interest i.e. earned should be added to the principal in order to create the new principal amount. The interest earned at the closing of every year should be more than the last period as the principal amount rises at the starting of the period

Also, the interest earned via the compound interest should be grown much faster as we compared to the fixed rate interest

Therefore the last option is correct