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Three of these are wrong. Find the one that holds.

Exercise and reference answers

Questions
  1. Question
    Three of these statements about compound interest are false.
    Choices
    1. Item
      Its base is last year's amount
      Correct
      Yes
    2. Explanation
      That describes SIMPLE interest.
      Item
      Its base is always the original principal
    3. Explanation
      It grows as the base grows.
      Item
      It is the same every year
    4. Explanation
      It overtakes simple interest after year one.
      Item
      It is always less than simple interest

Explanation

Each trap gives compound interest a simple-interest property. Source: syllabus Maths, Ch 7 Comparing Quantities.
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