Question

Which type of interest is earned on both the principal plus any previous interest earned?

Answer 1

Answer:

Compound interest

Step-by-step explanation:

Compound interest is a type of interest that is earned on both the principal plus any previous interest earned.

This ultimately implies that, the interest are compounded either on a daily, weekly, quarterly, monthly or annual basis.

Mathematically, compound interest is given by the formula;

$A = P(1 + \frac{r}{n})^{nt}$

Where;

A is the future value.

P is the principal or starting amount.

r is annual interest rate.

n is the number of times the interest is compounded in a year.

t is the number of years for the compound interest.