Interest earned on both the initial principal and the reinvested interest from prior periods is called:
A)compound interest
B)simple interest
C)complex interest
D)dual interest
E)interest on interest

Question

Quizplus · Accepted Answer

Compound interest refers to the interest that is earned not only on the initial principal amount but also on the accrued interest from previous periods. This results in a faster accumulation of wealth compared to simple interest, which only calculates interest on the initial principal amount. Complex interest and dual interest are not common terms used in finance, while interest on interest is a synonym for compound interest.

Interest Earned on Both the Initial Principal and the Reinvested