The amount earned on a deposit becomes part of the principal at the end of a period and can earn a return in future periods is called
A) discount interest.
B) compound interest.
C) primary interest.
D) future value.

Question

Quizplus · Accepted Answer

The description given in the question is of compound interest where the interest earned in one period is added to the principal amount, and the total amount becomes the principal for the next period, resulting in compounding of interest. Option A and C are incorrect because they do not describe the given situation accurately. Option D, future value, is related to compound interest but it is not a term used to describe the situation given in the question.

The Amount Earned on a Deposit Becomes Part of the Principal