Question

When interest is paid on both the principal amount and prior interest earned, this is called:...

When interest is paid on both the principal amount and prior interest earned, this is called:

simple interest

accounting rate of return

the discount factor

compound interest

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Answer #1

Simple interest is the interest charged on the principal sum of money for a specified period of time. No interest is charged on interest in case of simple interest but interest is charged only on principal sum

Compound interest is the interest charged every year on the principal sum plus the cumulative interest earned till the beginning of the year on the principal sum. So, in case of compound interest, interest is charged on interest

So, as per above discussion, option D is the correct option

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