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What makes compound interest different from simple interest?

AIt earns no interest at all
BIt earns interest on interest
CIt ignores the time period
DIt always uses a fixed sum
Answer & Solution
Correct answer: B. It earns interest on interest
1. Under simple interest only the original investment ever earns interest. 2. Compound interest is the interest earned on the principal amount and on its accumulated interest. 3. Each year's closing balance therefore becomes the opening balance for the next year. 4. This is good news for an investor but bad news for anyone repaying a loan. _Source: Siyavula Mathematics Grade 10 (Everything Maths, CC BY 4.0), Chapter 9: Finance and growth_
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