Compound Interest Basics

Interest that remains constant over time

Interest on principal only

Interest on previously accumulated interest

Interest on principal plus interest (correct)

Compound interest has a higher interest rate than simple interest

Simple interest is used in finance and economics, while compound interest is not

Compound interest involves reinvesting interest, while simple interest does not (correct)

Simple interest involves compounding, while compound interest does not

The number of times per year the principal amount is adjusted for inflation

The total number of periods per year

The frequency at which simple interest is calculated

The number of times per year the accumulated interest is paid out or capitalized (correct)

<p>The compounding frequency is 12, with time periods measured in months</p> Signup and view all the answers

<p>The nominal interest rate</p> Signup and view all the answers