When the interest from year one is built into the principal balance, the interest is referred to as
A)differential interest.
B)discounted interest.
C)compound interest.
D)future interest accrued.

Question

Quizplus · Accepted Answer

Compound interest is the interest earned not only on the principal balance but also on the interest accumulated from previous periods. This means that the interest from year one is added to the principal balance, and interest is calculated on the new, larger amount in year two, and so on.

When the Interest from Year One Is Built into the Principal