Understanding Compound Interest

What is the term used to describe the interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan?

• Simple Interest

• Compound Interest

• Fixed Interest

• Variable Interest

If you have $100 in a savings account that earns 10% compound interest annually, how much will you have after one year?

• $100

• $110

• $120

• $130

Which of the following is a benefit of compound interest?

• It decreases the amount of money you earn.

• It allows your money to grow faster over time.

• It keeps your money the same.

• It reduces the interest rate.

If you invest $200 at a compound interest rate of 5% per year, how much will you have after two years?

• $210

• $220.50

• $220

• $231

Which formula is used to calculate compound interest?