When will a future value calculated with a simple interest rate exceed a future value calculated with compound interest at the same rate?
A) When the interest rate exceeds 100% per annum
B) When the investment period exceeds 50 years
C) When the initial deposit exceeds $1 billion
D) This is not possible with positive interest rates

Question

Quizplus · Accepted Answer

With positive interest rates, compound interest will always result in a higher future value than simple interest, regardless of the interest rate or investment period. Therefore, it is not possible for a future value calculated with simple interest to exceed a future value calculated with compound interest at the same rate.

When Will a Future Value Calculated with a Simple Interest