True or false: compound interest

Exercise and reference answers

Questions

1. Statement is true

   Yes

   Statement

   Compound interest uses the previous year's amount as its base.

2. Statement is true

   Yes

   Statement

   It equals simple interest in the first year.

3. Statement is true

   No

   Statement

   It falls behind simple interest over time.

4. Statement is true

   Yes

   Statement

   The interest added each year keeps growing.

5. Statement is true

   Yes

   Statement

   Amount equals principal plus interest, and becomes the next base.

Explanation