Which of the following statement is CORRECT regarding compound interest?
Correct answer: B. It earns profit not only on principal but also on interest.
- A. It is the most basic form of calculating interest.
- B. It earns profit not only on principal but also on interest.
- C. It is calculated by multiplying principal by rate multiplied by time.
- D. It does not take into account the accumulated interest for calculation.Compare Personal Loans
Explanation
Compound interest earns returns on both the original principal and interest accumulated from earlier periods. Option c describes simple interest, while option d denies the defining feature of compounding.
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