Which one of the following statements is correct if you invest $100 in an account at a simple interest rate of 4% for five years? A) You will earn more interest than if you invested in an account which compounded the interest. B) For every $1 you earn in interest in the first year, you will earn ($1.04) interest in the second year. C) You will earn interest on interest for four of the five years. D) The amount of interest you earn in year five will equal the interest you earn in year one, whether or not you reinvest your earnings. E) The total interest you will earn over five years will be equal to $100 x (1 +.04)^5.

Question

Quizplus · Accepted Answer

Simple interest means the interest is calculated on the principal amount only, each year, so the interest earned each year remains constant.

Which One of the Following Statements Is Correct If You